Key Person Protection
Continuing our series on Business Protection Scott Robinson of Sabre Financial looks at the impact the loss of a key individual can be to your business.
Most small businesses insure their premises, their stock, and their fixtures and fittings. If a business is hit by fire, flood or theft, such insurance provides a financial lifeline to help ensure that it keeps going through difficult times. However, many smaller businesses don’t insure key individuals who are arguably just as vital to future success. This can leave them vulnerable should a vital employee become critically ill, or die.
For example, if one of your main sales people became critically ill and could not return to work full-time, would this jeopardize relationships with your key clients and affect your own company profits? If an owner or partner was similarly indisposed, would you be able to grow the business in the future?
If you are the owner or partner in a smaller business it’s worth identifying those individuals who are essential to the success of your firm. If you think their loss would have a significant financial impact, then it may be worth looking in more detail at the insurance options.
Key Person Protection is basically life insurance, with or without a critical illness cover option, which a business takes out on certain important members of staff. It can provide some financial stability in the event of a key member of staff being taken critically ill or dying. The business pays the premiums, and if the insured person dies or becomes critically ill during the policy term, the policy will pay out the agreed sum to the business.
This financial pay out can help ensure the business remains viable, continues to trade, and has the opportunity to find a suitable replacement. Key Person Protection insurance is there to protect your business.
If you are a small business in the early stages of development, you are least likely to have Key Person Protection insurance but, arguably, the most likely to need it, as the loss of a key member of staff could jeopardize your whole business.
Next month Scott will discuss how Shareholder Protection can provide the business with the funds needed to purchase the shares from a deceased partner’ estate helping you keep control your business.
Sabre Financial is a trading title of Sabre Financial Planning Ltd. Sabre Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.
By Sabre Financial | Thursday, March 29, 2018