Have you ever thought about what would happen to your business if you, or a key member of staff, were unable to work for a long period of time? None of us like to think about it much, but the unexpected death or long-term incapacity of key staff members or business owners can bring a small business grinding to a halt.
For these companies, where everything relies on just one (or a small number of) key person(s) in order to continue, Business Protection can help to prevent potentially serious financial hardship or even complete ruin.
What is Business Protection?
Business Protection is the umbrella term for a collection of life assurance policies that are designed to protect your business if a key member of staff were to die unexpectedly, or become incapacitated through accident or illness.
Like most forms of life assurance, we all hope that it is never needed. However, knowing that the policies are in place can give you and your employees peace of mind that, if the worst should happen, your business will be protected, minimising disruption to the business and ensuring your family’s inheritance is also protected.
When looking at Business Protection, a good place to start is by thinking about a business interruption plan. This should ensure the continuation of trade in extreme circumstances, such as a flood, fire or computer failure that prevent business continuing as usual.
Most people understand these key risks, and general insurance policies are available to provide the appropriate cover for buildings, stock, data and income.
However, the business interruption plan and general insurance policies won’t necessarily address the impact of losing key staff through death or illness. Some key questions to ask yourself include:
- If you became ill, or died, would your business recover from the loss of profits caused by your absence?
- Does your business have loans that would have to be repaid?
- What contingency plans are in place in the event that one of your key staff or fellow directors falls ill, or dies?
- Would you or your colleagues be able to keep control of the company if a major shareholder died?
Failing to plan for events such as these could prove disastrous to the future of the business, but by taking out the appropriate assurance you can plan to mitigate their impact by:
- Ensuring any business debts are repaid
- Providing a cash injection to help find and replace key staff
- Purchasing shares from the estate of a deceased business partner or director
The cover required largely depends on the type and size of business you run and the risks that are identified. Within Business Protection there are four main policies: Shareholder (or Partnership) Protection, Business Loan Protection, Key Person Protection and Relevant Life Policies.
This series of blog posts will explain these four main aspects of Business Protection, and help you to identify which might be correct for you. However, we recommend that you always seek the advice of a qualified professional before purchasing any cover.
By Craig Hilton DipPFS