The case for business protection
For most businesses, insurance is an accepted basic running cost. Yet despite paying for insurance for buildings, contents and key equipment many companies overlook protecting their real key asset; people.
People are at the heart of any business, and are responsible for its success. Without key members of staff, a business could come under serious stress and may even have to stop trading.
The right business protection cover can help to;
- Repay bank loans or other borrowing
- Replace key employees
- Protect profits
- Give the surviving owners the money to keep control of the company, if a partner or shareholder dies
Yet the majority of the estimated 5.4 million private sector businesses in the UK don’t have any financial protection in place to cover their most important people.
People are a business’s greatest asset, and the importance of arranging protection is just as vital for a small business as it is for a large company.
Sole Traders; typically the sole trader is the business, and so income could reduce or cease if they died or were unable to work for a long period due to illness or accident. The sole trader could arrange insurance to either replace income or pay out a lump sum to protect themselves and their dependants.
Partnerships; whilst many partnerships operate on an informal arrangement, if there is no legal agreement in place then the death of one partner automatically dissolves the partnership.
Therefore tailored cover, protecting the interests of each partner, will give them (and their families) peace of mind against the financial consequences of a partner dying or being unable to work for a long period.
Private limited companies; a private limited company may involve just one person, or have a workforce of several hundred employees.
Share protection, along with the correct legal agreement, will reassure major shareholders that their interests and those of their families are looked after.
The company can also take out cover for any of its “key” employees, who are responsible for significant profit generation. In the event of their death, accident or serious illness, a lump sum would be paid to the company to protect profits whilst a replacement is found.
Even if you have protection in place, it is always worth reviewing, to ensure that it has been correctly set up and to check that the cost remains competitive.
Arranging business protection is complex, and businesses should seek independent legal and financial planning advice. If you would like to discuss protecting your business in more detail, please contact OCM Wealth Management on 01604 621 467.