The business of protection
Every business has a lifecycle; from its early development through to start-up, expansion and, hopefully, maturity and exit. At any stage, though, it’s important to consider how key assets or loans are protected in the event that something risks the ability to continue trading.
Key person protection
Perhaps the greatest asset of a business is its people. Despite this, Legal & General’s latest ‘State of the Nation’s Small and Medium Enterprises’ research found that more than half of the UK’s small businesses think they would cease trading in less than a year if a key employee died or became unable to work. This stark figure highlights the importance of protecting the people responsible for the continuing success or growth of the business.
If your business relies on certain employees, it’s important to arrange protection against the financial loss caused by their death or serious illness.
An insurance policy often referred to as Key Person Insurance can be taken out on the life or health of such an employee. This may be appropriate where that individual’s knowledge, work, or overall contribution is considered uniquely valuable to the company. It can cover the costs or losses that may be caused by the loss of that person.
Business loan protection
After the initial whirlwind of setting up a business passes and thoughts turn to growth, the business owners might choose to borrow money to fund its expansion. In fact, the research from Legal and General shows two thirds of businesses have some form of borrowing.
The most common type of borrowing taken out over £50,000 is for business loans, overdrafts and Directors Loan accounts.
Most types of business loans can be protected with a policy that provides a lump sum to cover loans and other credit facilities if a business owner dies, or in some cases becomes seriously ill (if critical illness cover is included).
Once a business is more established, a share protection policy might be appropriate because it can help cover the value of an owner’s share of a business. If an owner dies or is diagnosed with a critical illness, share protection written in trust can provide the other business owners with enough cash to buy out the shares and continue to run the business.
Whether you’re just starting up, or looking to expand your business, we can advise on a range of business protection options that might be suitable. Please get in touch.