Business Insurance: It’s More Than Just Protecting Your Stock

There are many books which have been written on the subject of how to grow a successful business. Common topics are how to invest in your product, build a loyal customer base and nurture a skilled and loyal team of employees.

There has also been a great deal written about the demise and failure of some of the greatest brands, where small mistakes have caused the mighty to fall. However for many small firms and professional practices, the biggest risks are often small and simple, yet these are rarely discussed. One of the greatest threats can be losing a key partner or employee because of ill health, death or they move to a competitor’s business.

Even when business owners openly admit that their company’s profit and performance is influenced by the contributions of a small number of individuals, be they staff or directors, there is often little in place to protect against the risk that they may suddenly not be available to work.

It makes sense to have some sort of protection in place, in the same way that many companies have buildings and contents insurance in place to protect their physical goods against theft or damage.

Managing Risk

There are a range of insurance products which help business owners to manage their company’s exposure to risk. Known as ‘Key Person’ insurance policies, these are effectively life insurance policies (and some include critical illness insurance) which can be used to help a business in a number of different ways when faced with the death or critical illness of some owners/employees:

Insurance to cover a business partner or co-owner

This can be a simple policy which protects business partners. It pays a lump sum (the sum assured) which, depending upon the agreement between the business partners, may enable the business to ‘buy-out’ the partner’s share should they become critically ill, or to buy the share from the inheriting family should they die. This can prevent complication at what is often an emotional and difficult time, ensuring the family are financially provided for and enables the surviving business partner to continue to run the company independently.

Insurance to cover the costs of losing a key employee

This is often considered important for those who have high performing staff. Key members of a sales team or a person with specialist skills can be vital to the running of a business and difficult to replace. The sum assured paid out can cover a loss of income during the recruitment process and assist with the costs involved in finding and introducing a new member of staff to the team.

Insurance to cover business debts

Your business bank is likely to request various types of security when you borrow money. One security could be a personal guarantee from the directors or partners of the business. Key Person insurance can be used to protect the business's ability to repay these debts in the event of the death or critical illness of one of the insured directors/partners.

Depending on the type of business you have and the risks you wish to protect against, we can advise you on a suitable protection policy to give you the cover you need. To find out more or to arrange a quote with one of our Wealth Planners email letstalk@sanlam.co.uk

This article is for information purposes and should not be treated as advice. Individual circumstances should always be considered prior to purchasing any financial products. For further information please contact your Wealth Planner.

Sanlam is a trading name of Sanlam Wealth Planning UK Ltd (Reg. in England 3879955) and English Mutual Ltd (Reg. in England 6685913). English Mutual Ltd is an appointed representative of Sanlam Wealth Planning UK Ltd which is authorised and regulated by the Financial Conduct Authority.

letstalk@sanlam.co.uk