Running your business takes a lot of work at the best of times.
Yet despite how much effort business owners are putting in, a survey of 500 business owners by insurance provider Vitality has found that one in three businesses are not insuring against the loss of a key person.
The reality is that there are some people who you just can’t do without. But, worrying what would happen if those key members of staff were unable to work doesn’t have to be a concern with the range of protection options available.
If you’re a business owner, not having these measures in place could be putting your business, and potentially even your family, at risk.
That’s why every owner should look at business protection to secure their company in case they lose a key person.
Protection ensures continuity in operations
If the last year has taught us anything, it’s that having protection in place to cover ill health and sickness is vital to the survival of a business.
In fact, a study from Legal & General found that 53% of business owners said they thought they would have to fold within a year if they lost a key member of staff.
That may sound like an overreaction, but ask yourself: what would happen to your business if you, another key member of staff, or a key shareholder became critically ill or even died unexpectedly?
Would your business be able to continue operating at its current level? Would you still be able to pay the rest of your employees? Or, if you’re a sole trader, would you be able to support your family while you’re unable to work?
Losing someone critical to the operation of your business could have serious consequences. But, by having protection in place for such an event, the payout you, your key person’s family, or your business receives could be vital in staying afloat.
There may be many “key” people in your business
Depending on what kind of business you run, a “key” person could mean many different things.
It could be any one of your employees, from a top salesman that your business relies on to generate income or bring in new business, to someone with specific technical knowledge of your products and the markets you operate in.
It could even just be someone who’s built good relationships with your clients or customers over the years.
At the executive level, your directors, shareholders, fellow business owners, or even you could be considered key to keeping the business running.
Having protection in the event that something goes wrong is a pragmatic decision you can make to ensure the business can survive without that key person, no matter who they are or what they do.
Protection can be a tax-deductible expense
Many business owners don’t realise that protection and insurance can be tax-deductible expenses.
By buying cover through the business, you could gain the security that protection provides, while also reducing a potential tax bill.
As long as your company is taking out a policy on your employee, the insurance is for loss of profits resulting from the loss of that key employee, and the insurance policy is either annual or short term, your business may be allowed tax relief on the premiums.
As a result, it can make fiscal sense to purchase protection through the business.
Various options available for different needs
There are a wide range of business protection options available, depending on the needs of you, your employees, and your company.
Key person insurance
Key person insurance is designed specifically for insuring vital members of your company.
Your business receives a tax-free lump sum if the insured individual becomes seriously ill or dies while working for you. This money could help shore up the business while you find a way to operate without that key individual.
Critical illness cover
Critical illness cover pays a lump sum if you or a key employee becomes ill with specific illnesses listed by the insurer. Commonly included illnesses are stroke, heart attack, and certain types of cancer.
This could be useful if you’re a sole trader, giving you income in a situation where you may not be able to work.
If a covered shareholder dies while in control of part or all of the business, this cover will pay a lump sum to the remaining shareholders.
This allows them to buy the deceased person’s stake, giving the deceased shareholder’s family much-needed income, while also relieving them of their responsibility in owning shares in the business.
Similar to shareholder protection, partnership protection pays a lump sum to remaining partners in a business if the insured individual dies or becomes seriously ill.
This ensures the remaining partners are able to buy out the ill or deceased partner’s stake, allowing them to make decisions for the business in their absence.
Need help choosing protection and insurance?
If you’d like to know which protection choices would best suit your business, please get in touch with us at BlueSKY. We can help you choose the right cover for you, your business, and anyone else that it might impact.
Email firstname.lastname@example.org or call us on 01189 876655 to find out more.