Building a business is no easy feat. Behind the shiny brand colours is often blood, sweat and tears, as many business owners give their heart and soul (and likely a few too many sleepless nights!) to growing their company. Sound familiar?
As many of us have learned the hard way, the road to success can be a long, winding one, with many unexpected bumps along the path. So, whatever part of the journey you’re on, whether you’re at the exciting beginning, the sometimes stressful middle or the profitable end, it’s important that you have the right insurance in place to protect the business that you've worked so hard to build.
If you run a business, then you will likely already be familiar with employers’ liability insurance, public liability insurance and professional indemnity insurance, but there is another category of business insurance that can give you that added layer of defence to weather unexpected storms. It’s called business protection insurance, and it is well worth taking the time out of your busy schedule to fully understand how it can help you and your company. Ultimately, it refers to a range of products that protect the lives of the important people in your business, so your company’s financial future stays safe, should the unexpected happen.
This guide will take you through all the different business protection insurance options available to you, and help you decide on the most compatible type for your business.
What is business protection insurance?
Fundamentally, business protection insurance is there to look after your organisation in a time of need and protect its finances in the sad eventuality that someone at the company passes away. It’s a life insurance policy designed for businesses, which pays out a lump sum of money to ensure minimal financial disruption should the unexpected happen.
Death is never a nice thing to think about, but it’s important for business owners to consider what a partner, shareholder, or employee death could mean for the future of the business. Some of the common ways business owners use payouts from business protection cover, are:
To protect business ownership and maintain control (shareholder protection)
Should one of the owners of a company pass away, it’s likely that their share of the business would transfer to their loved ones. Business protection insurance provides a payout, should such an event occur, which would allow the surviving business owners to keep full control of the business by buying back the deceased’s share of the business, from their family.
To protect profits (key man insurance)
Often the loss of a business partner can result in a significant loss in revenue, especially if that person was integral to the running of the organisation. At such a time, a lump sum of money, courtesy of business protection insurance, can be exactly what you need to balance out a loss in finances and ensure your business bounces back financially.
To pay off business debts (business loan insurance)
Should a key partner pass away, and business income be hit, a business could suddenly struggle to handle its debts. An insurance payout in this scenario could be a huge weight off the shoulders of the surviving owners - being used to cover debts which are sometimes even secured personally – adding to an already incredibly stressful scenario.
What is shareholder and partnership protection insurance?
The death of a partner or shareholder would come with its own unique set of consequences for your business - often involving the passing of their share in the company to their family. The challenge is then around control, as the deceased’s family could decide to sell their inherited share of the business to a third party, resulting in a loss of control for you and other surviving partners.
Investing in shareholder or partner protection insurance can remove this risk and ensure that you and surviving partners maintain control of your business, by providing a lump sum payout to buy back the share of the business that would pass to the deceased’s family. Shareholder protection insurance also acts to support the best interests of the family who receive a payout to help alleviate financial stress during a difficult time (and most likely the last thing they would want to be doing in the wake of a loss is unexpectedly managing a business!).
What is key person insurance?
As a business owner, you have many valuable assets - for instance, key machinery and equipment - but arguably the most valuable components of your business are your people. The loss of a key employee can harm the financial future of the business in many ways, but this is why key person cover (also known as ‘key man insurance’) exists - to help your company cope financially should a particular person, who is vital for business success, sadly pass away or become terminally ill.
In short, key man insurance would pay out a lump sum amount of money if a person, key to the business, passed away. This cash injection can help to maintain profits, cover debt, rebuild customer confidence and even help fund the processes of recruitment and reorganisation. The policy only covers the specific individuals you elect to cover, and the onus is on you to decide who qualifies as a key person, but it could be anyone who is an important contributor to the success of the business.
If you have key employees and are considering purchasing a key man insurance policy, why not speak with one of our business protection experts who can recommend the right level of cover to suit your business’s unique needs? Give us a call on 01392 241 850 for help today!
What is business loan protection?
Business loan protection insurance can be used to safeguard against the event of a business owner’s death (or if they suffer from a critical illness) when there are outstanding payments to cover, including loan repayments, director’s loans, venture capital loans, personal guarantees, or commercial mortgages.
A lot of businesses rely on loans to help their businesses grow, this is a very normal part of growing a company. However, the responsibility of repayment often rests on the shoulders of a few key individuals. Taking out business loan protection insurance can provide a safety net to help protect the financial security of your business if one of those key individuals were to sadly pass away.
It’s worth bearing in mind, before taking out this type of cover, that each key individual’s level of liability can vary depending on the particular loan. If we have lost you there, don’t worry - we have specialists that can help talk you through this and work out a policy that’s suited to the terms of the loan and your business. Give our experts a call on 01392 241 850 for some personalised business support.
How much business protection insurance do I need?
We can’t stress it enough - business protection insurance needs can vary for each business and its own particular circumstances. In order to decide on the right plan for your business, you first need to make sure you know exactly what you are protecting.
With that in mind, it is essential that you have an awareness of the make-up of your business - from the ownership to the workers on the floor - and the risks that it faces, in order to make the best decision.
To help, here are some factors to consider:
How long you will be wanting to insure certain individuals for
The particular sum that needs to be insured - i.e. how much each insured individual is worth to the company. In other words, what cost would you need to be able to cover, should your business sadly lose a partner or key employee?
Pertinent information about the individual(s) you are insuring, which can have a bearing on the price of the insurance policy in question - i.e. medical circumstances, age, and whether they partake in any dangerous hobbies
This guide has focused on protecting the financial interests of your business, but it is important not to forget about your personal insurance needs and those of your family, too! You might want to consider life insurance and critical illness cover to protect your loved ones should you fall seriously ill or sadly pass away. Also, income protection insurance can cover your regular expenses should you become too ill to work for an extended period of time.
How can I buy business protection insurance?
When considering business protection insurance, there are so many things to think about and a wealth of options available, so it is a good idea to seek out expert advice. Our insurance specialists can help you establish whether business protection cover is suitable for your business and which type of policy would best fit your circumstances.
Speak to the experts...
Business Protection products are not avaliable through the Cavendish Online website, as they are not suitable for everyone.
Our team of professional advisers are on hand to help with any questions you may have about Business Protection. They can also provide quotations for cover and ensure everything is set up correctly, supporting you and your business every step of the way.
Speak to an adviser now on:
01392 43 61 93
