Why keyperson insurance is important for SMEs
For many owners of small to medium sized businesses (SMEs), their business is their life, so it makes sense for them to try to keep it safe from all risks. Yet many SMEs overlook the need to protect their business from the potential damaging effects of a long-term illness or death to a key person.
A report from Legal & General entitled ‘State of the Nation’s SMEs’ showed that 53% of the UK’s small businesses think that they would cease trading in less than a year, should a key employee die or be diagnosed with a critical illness and be unable to work.
Whilst most business owners are rightly focused on the day-to day pressures of running their business and ensuring its profitability, it makes sense to take some time out to consider the impact that the loss of a key person could have on your business.
The financial implications of losing a key member of staff could be significant. These could include the loss of profits or sales, the cost of finding and training a replacement, plus the potential loss of customers and suppliers, if the key person was their main contact.
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 financial help to help ensure that the business keeps going through difficult times. But many SMEs don’t insure key individuals who are arguably just as crucial to the business if not more so.
As a small business owner or manager, you should therefore identify those individuals within your business that are critical to the success of the firm. Obviously, many SMEs have tight budgets so it is important to select only those whose loss would have a significant impact on your business.
As the Legal & General report makes clear, many businesses would collapse without a key employee, so keyperson insurance can play an important role in keeping a business alive. It can also help your business weather the storm by providing funds to help pay off debts and find a replacement.
In small businesses, you and your employees are often like family – after all, you spend a lot of time at work and the people you work with are people you would want to protect. Keyperson insurance provides you with peace of mind, knowing that you have taken steps to protect the people you employ, in the event of the death of a key person.
To discuss how keyperson insurance can help protect your business and its future, talk to Kellands Corporate.