Business protection helps businesses plan for the unexpected. It is designed to protect companies from financial loss in the event of the owners or key personnel dying, being diagnosed with a serious illness or becoming incapacitated.
You may already have insurance in place in case of catastrophes, such as fires and floods, but have you considered the impact of losing your most valuable assets? Losing someone crucial to the business could have disastrous consequences. These include loss of profits, interruption of cashflow, changes in shareholder control and difficulty making loan repayments. In worst-case scenarios, the business could go under.
Fortunately, with business protection you can safeguard your company if the worst were ever to happen. In the event of death, critical illness, or accident/injury, your company can receive a lump sum or a series of payments depending on your needs.
Types of Business Protection
To fully protect your business, you should consider taking out any of the following:
Key Person Protection
A key person is someone with specialist skills, knowledge and experience that is vital for the success of the enterprise. This could be the chairman, managing director, a computer specialist or a sales manager. To lose any one of these could be damaging. Key person protection is an insurance policy on the life of the person. If they die or become critically ill, the plan's benefits will be paid directly to the company. This can be much-needed financial resources that keep the company going while it is restructuring or recruiting a replacement.
Share Protection
If a director or partner died, would you have sufficient funds to purchase their share of your private company? If not, the implications for your business could be significant. With share protection, a lump sum is provided to the remaining directors/partners to purchase the deceased person's interest in the business.
Loan Protection
Many businesses take out loans and the ability to repay them often rests with a few key people. The death of a director, manager or partner who has guaranteed a loan can put severe financial pressure on a company. Creditors may demand the repayment of outstanding loans at short notice or change repayment terms to protect their interests. However, this is not a concern with business loan protection, a type of insurance that covers loan repayments and other debts associated with the loss of a critical person.
Employer's Liability Insurance
If employees are injured on your premises or become ill because of their work they can sue you for compensation if they believe you're responsible. Employers' liability insurance will pay out compensation and associated legal costs if an employee or ex-employees claim against you is successful.
Advantages of Business Protection
- It provides a financial safety net if a key person becomes seriously ill or dies.
- It provides adequate funds to ensure business loans are repaid.
- It provides sufficient funds for the remaining partners to buy out the seriously ill/deceased partner's share in the business.
- It ensures business continuity.
- It ensures the deceased's family receives a fair share for their loved one's interest in the business.
Read less
