Insuring for the unexpected
Every business has key workers, without whom the company could suffer irrevocably
How would your business fare if one or more of the directors died or became permanently incapacitated? Would you struggle to survive?
The death of the managing director, operations director or a key specialist, for example, could leave large shoes to fill.
A report carried out by the British Chamber of Commerce shows that 98% of businesses have at least one key individual – someone whose death or serious illness would impact on company’s profits. If this happened, then almost half conceded their business would probably fold within a year.
Despite this, figures from the Department for Business Information and Skills reveal that more than 90% of firms have no business insurance in place.
Business insurance is vital: it not only assists with succession planning, but also gives peace of mind.
Any successful claim could replace the financial loss of a key individual and keep your business afloat.
It could also protect business borrowing. Many businesses have to borrow money to start up or expand. Often the ability to repay this loan lies with a few key people. Directors might have given personal guarantees or used their own residential home as security against this borrowing – meaning your dependants could suffer if you die without adequate business insurance.
If a partner in a business died, there could also be problems relating to their stake in the company. This shareholding could pass to outside investors, which could have catastrophic consequences if the beneficiary does not share the vision of the remaining owners, either now or in the future.
This could lead to an impasse in the company’s operations, resulting in reduced revenue and ultimately financial collapse. With insurance cover, however, the remaining owners could have the financial means to buy out the shareholding. Firstly, you must identify the people who are key to your business, and quantify the risk in financial terms of them being unable to work due to death or incapacity. Having established the risks that can be cost-effectively passed to an insurance company, make sure you are covered.
Cover can be taken out for one or more key individuals, or all employees.
Insurance provides that much- needed safety net to all types of businesses, from sole traders to partnerships and limited companies.
Business protection is all about insuring for the unexpected. It’s a way of protecting your business if something goes wrong. In business, public liability insurance is essential and business protection should be no different.
By Doug Blanchard
Published in The Press & Journal on