Key Person Insurance:

A “key person” could be anyone within the business whose death could lead to a financial loss for the business: Managing Director, Sales Director, IT Manager, … ?

These individuals have the skills, knowledge, experience and perhaps leadership attributes that contribute to the financial success of your business. So, who are your “Key people”?

Could losing one of these people cause a loss of business and market share, resulting in profit reduction or even a loss?

The proceeds from a key person policy would be used to replace the lost revenue that individual would have otherwise generated.

Surveys have revealed that many businesses ignore the effects on their business of the death or serious illness of a key employee:

1Of those surveyed:
40% of businesses would cease trading within one year;
60% thought it would take more than a year to find a replacement for a key employee 1

One final thought on this KEY PEOPLE; consider whether you could you afford to take time out from your business to care for your partner, if they fell seriously ill?

Small Businesses are often family run and the impact on the business due to the long term ill health of the partner of a key individual within it can also be catastrophic or at best distracting.

Whilst not KEY to the business from the Inland Revenue’s perspective, a husband, wife or long term life partner, even if they are not active in the business, can be just that. Health insurance, death benefit or critical Illness cover is just as crucial for them.

If you haven’t recently reviewed your life and health insurance arrangements, please get in touch and we will be pleased to discuss some options with you.

Share Protection:

If a shareholder or partner in a business passes away there can be serious implications for that business. It doesn’t take much imagination to see that the day-to-day running of the business could be severely hampered, especially if the deceased was very ‘hands-on’.

Unfortunately, what many business owners don’t anticipate is the potential impact on the ownership of their business of losing a shareholder or partner.

If a business owner dies with no share protection in place their share in the business may pass to someone in their family:

• The surviving business owners could lose control of some, or all, of the business.

• Their family may choose to become involved in the ongoing running of the business or could even sell their share to a competitor

Properly set up, share protection will help to avoid these issues:

• It provides the surviving business owners with the funds to purchase the deceased’s shares from their family, at a pre-agreed fair value.

• The surviving business owners retain control of the business while the family of the deceased receive payment at a pre agreed, fair value for their share of the business.

37% small to medium sized businesses in the UK have no share protection cover in place 1

Relevant Life:

Although not a Business Protection product, Relevant Life Plans are term life assurance plans that allow an employer to provide death in service benefit for employees. It is a family protection policy designed to pay a lump sum if the person covered dies or is diagnosed with a terminal illness, while in employment during the term. A Relevant Life Plan is paid for by the employer.

Business Loan Protection:

43% of British businesses have some form of unprotected debt and many businesses have no plans in place to repay this debt in the event of the death or Critical Illness of a key person.

In practice, this means that the owners of the business have limited choices to make about the best ways to proceed. They will either have to:

• continue trading in order to service the debt or

• if continuing to trade is not an option they may need to accept personal responsibility for the debt.

The proceeds from a business loan protection policy could be used to re-pay the debt and the owners would be in a position to make sensible commercial decisions about the future of the business.