If you’re a business owner, there will be plenty on your mind as you concentrate on the daily running’s of your business. But if you or another key worker were to fall ill, how would your business cope? How would this affect your profits? How would it effect your clients?
The loss of a keyworker can devastate a business. It can mean immediate challenges are left for remaining staff and affect long-term ambitions. Yet, many small and medium sized businesses haven’t taken steps to protect themselves should something happen to a key worker. It’s an oversight that could mean the business is unable to recover should something happen.
Less than 1 in 5 SMEs cover key people
Similar to taking out protection products to ensure your home, possessions or car, key person cover protects your business should something happen to those who are fundamental to your firm’s operations.
Key person insurance is usually similar to a life insurance policy, as it will pay out a lump sum if the named key person passes away. However, additional protection can also be taken out to cover illness. The money paid out can provide a cash injection when the business needs it, allowing the firm to continue operations and help with the recruitment of new staff where needed. The business pays the premiums of a key person policy.
Research from Legal and General found that just 18% of SMEs have any insurance to cover key personnel. While 63% of businesses said the death of an owner would have the biggest impact on their business
While we hope nothing will happen to ourselves or others, the unexpected can happen. Key person insurance can provide businesses with stability if things outside of their control mean that key personnel are no longer able to work due to illness or death.
Who are your key people in a business like yours?
The Legal and General research found that 99% of businesses agreed they have at least one key person. Some 38% said they had three or more.
So, who are the key people in the business?
]f you’re a business owner, you’re likely to fall into that category yourself, particularly in the early years. Ask yourself how successfully your business would be able to operate without you. If there would be challenges, it’s worth considering key person protection.
Other employees may also be key people to your firm. Ask yourself if the loss of an employee would affect profits and mean your business would face financial hardships. While this includes direct sales, you should also consider other areas, for example, the value of skills, innovation, networks and an understanding of how the business operates that an employee brings.
Thinking about key person insurance can be challenging. But it can give you and the business vital breathing space to make the right decisions, rather than be rushed into them.
The loss of a key person in an SME can have a huge impact. It can mean the rest of the staff face increased workloads, the loss of important skills and knowledge, lost profits and, in some cases, termination of the business.
Choosing the right key person policy
If you’ve decided key person insurance can provide security for your business, it’s important that you take out a policy that suits your needs. There are three questions you should answer first:
1. Who should your key person insurance cover?
2. What circumstances should be covered?
3. What level of cover do you need?
With these answers, you’re in a better position to review and compare different policies and understand when they’ll provide you with protection. Do not hesitate to reach out and find out more information and discuss how this product can better protect your business. It’s not as expensive as you may think yet the benefits of any potential payout will outweigh the risks if your not insurance.