Running a business is full of challenges. While keeping your current clients happy and planning for business growth, you are probably also thinking about how to attract new clients and deal with any future issues. Arranging Key Person Insurance may not be on your list of things to do this year.
You may have plans if things go wrong in your business, for example a robust back up system for your data or insurance for your premises. But have you thought about insuring the people within your business? According to government statistics, only 25% of businesses ever get to the point where they employ staff, so building an effective team is a big step and it takes time and effort. Regardless of the sector you operate in, recruiting great people can be really tough. Add to that, the statistics around some critical illnesses make difficult reading – in the UK 375,000 people are diagnosed with cancer each year. Accident statistics are also shocking: 1,608 people were killed and 26,701 were seriously injured in road accidents in the UK in 2021. Each of those statistics is a person who has a family, a job and an employer.
When we talk with our clients, if they own a business we often raise the subject of Key Person Protection. Many of them have not heard of it, despite that fact that it can be a very helpful business investment.
What is Key Person Protection?
Key Person Protection is one way to safeguard your business against the death, terminal or critical illness of a key person in your organisation. It is an insurance policy which is designed to pay out a lump sum on the death or illness of the insured key person during the length of the policy.
This could be used to find a replacement, to pay off a loan or to make up a shortfall in revenue. Any of these actions can help keep your business trading and protect the livelihoods of everyone else connected with the business.
Who counts as a key person within your business?
A key person could be anyone who is crucial to the day to day running of your company. This might be a business partner, a director, an employee, or anyone whose skill, knowledge and experience affect revenue.
How should I consider who to include in a Key Person Protection policy?
Consider the responsibilities a key person might have. Think if any loans or financial commitments depend on that person, whether their loss would have an impact on sales, or whether their absence would impact on future planning.
How much could it cost my business to protect my key people?
Like any form of life insurance, premiums are calculated depending on a number of factors including the sum assured, the key person’s lifestyle and age, if they smoke and their health history. If you would like an idea of how much it could cost your small business to insure your key people, please talk to us and we can advise you.
Do you recommend a particular product?
No, we look at a wide cross section of the market, so it’s our job to research suitable insurance companies and find the right policy to suit your business.
Why should I spend money on Key Person Protection at the moment?
This is an important question, and we understand you may be keen to limit the costs in your business. However we believe you should think of Key Person Protection in the same way as you think of other insurances, back ups and contingency plans. It’s simply a tool to ensure that one person’s bad luck doesn’t end up having catastrophic consequences for the whole company.
To talk to us about Key Person Protection and other ways we can support your business, call 01332 913006.