If you own your own business, you will have insurance in place for your buildings, inventory, and vehicles, and you will likely have liability insurance. You can also be insured for professional indemnity and legal costs – but have you thought about insuring your most precious asset – your key personnel?
In the UK there are 3.9 million small, often family-owned businesses with up to four employees - if one of these key employees were to die or become seriously ill it could mean the end of the business. business, including limited liability companies, partnerships and sole traders.
If you're one of those people, you should seriously consider Keyman insurance, and here's why. Keyman Insurance financially protects businesses against the effects of the serious illness or death of personnel who are central to business success. It does this by providing cash when you need it most, so you can cover lost profits, inject more cash into the business, or hire temporary staff.
There are actually four different types of Keyman insurance:
• to help your business recover while your key person is away from work, or to train/hire someone new;
• insurance against loss of profits;
• to ensure the protection of shareholders or the interests of the company; and
• for people who provide business loans or bank facilities.
1 Protect your business if a key person is absent from work
Your key people are those who are an essential driving force in your business – the people who, if they were off work for a long period of time, your business would suffer greatly. It could mean reduced sales and profits, or it could mean your business is in serious jeopardy. Look at directors, partners, owners, think of your senior executives - every business is different, but the key people will soon appear to you.
By insuring these people, you will ensure that in the event of illness or death, you will have the money to hire someone new or train a replacement.
2 Keyman Insurance to insure against loss of earnings
The loss of key employees can have huge ramifications, if they are critical to the success of the business, their loss could put you at risk of bankruptcy. It is a good idea to insure against this possibility.
3 Keyman Insurance for Shareholders or Partners
In this case, the insurance will protect the company in the event of serious illness or death of shareholders or associates. Families may want to sell their share of the business, which leaves remaining members open to newcomers entering the business. Keyman insurance plans can be used to provide capital to purchase stock from the original shareholders or their estate.
4 Keyman Insurance insuring the guarantors
Many small and new businesses are required to provide a personal guarantee or charge on their personal property when taking out a loan. This particularly applies to small and new businesses. If one of these guarantors falls seriously ill or dies, lenders may decide to call back the loan. Keyman Insurance can protect you by repaying the loan and relieving all the pressure on the guarantor's estate.
Most major UK insurance companies offer Keyman insurance as a natural progression from their life and critical illness insurance arrangements. They can advise you further on the type of policy that would be best for you.
So the question is, can your business really afford NOT to have Keyman insurance?
