During the past few months, millions of businesses have been forced to shut temporarily, with employees furloughed or working from home under very difficult circumstances. With various business sectors reopening in July, many have suffered significant financial damage due to lockdown. For some businesses, productivity has been lost due to illness and self-isolation, while others have lost key personnel or shareholders, leaving a question mark hanging over their future.
Don’t leave your business vulnerable
It is likely that your business would at least experience some financial difficulties if key stakeholders were to fall ill or die. When thinking about whether you should take out business protection insurance, ask yourself: “Would your business survive if something were to happen to you, your co-owners or senior employees?” If the answer is no, then you would probably greatly benefit from taking out this specialist insurance. Below, we’ve outlined two of the most common types of business protection.
Share protection insurance
Even if a business has multiple owners, the death of just one of them could throw the business into turmoil. If no share protection policy is in place, then the deceased owner’s share in the business may pass to a family member, meaning that the remaining owners could lose control of part (or even all) of the business. Share protection is essentially a life insurance policy that covers you for the value of your share in the business, with the payout providing your co-owners with the necessary funds to buy your shares back.
Key person insurance
A ‘key person’ can be defined as an employee with specialist knowledge, experience and skills who contributes to the financial success of a business. If you were to lose a highly-trained employee, who carries out unique functions within your business, it could have a detrimental impact on your income and profits. Meanwhile, you are likely to use up time and resources you can’t afford in training up or recruiting a replacement. A payout from key person insurance could enable your business to avoid financial hardship and give you breathing space to find a replacement at your own pace.
There are many other types of protection insurance available, such as business loan protection and relevant life plans, so it’s advisable to seek guidance from a professional to ensure you choose the policy that works best for you and your business.
If you would like to know more, please get in touch.