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A rough guide to Business Protection

1 March 2018

A recent survey revealed 57% of family businesses would cease trading within a year, and 1/4 would close immediately following the loss of a key person. Fewer than half of SMEs having any sort of succession plan in place. So it’s more important now than ever to understand your options when it comes to Business Protection.

As every business owner or manager will know, you can’t plan for everything. However, you can make provisions to ensure that you and your company are protected should the worst happen.

From Key Man insurance to Shareholder Protection, there are so many facets to Business Protection, it’s easy to get lost. So here’s a quick rundown to help you to decide if they’re right for you.

First things first, what is Business Protection?

In a nutshell, Business Protection is a means of protecting your company against the unexpected. Whether your e-commerce platform undergoes a cyber attack or if a key member of your team is forced to take a leave of absence, this insurance policy ensures your core business is safeguarded against any eventuality.

Business Protection encompasses many things, which may or may not be applicable to the nature of what you do. It’s therefore important to get the right advice, from a qualified consultant like Corinthian, before you take out any policies.

Is it right for me?

It is estimated that only 2% of SMEs have Business Protection insurance which is a worrying statistic.

You protect your car, your equipment and your building, but what about your business? If you are a shareholder, the business may also be your way of funding retirement for you and your family.

Before you read on any further, ask yourself the following:

•    Could your business survive the loss of a key employee or shareholder?
•    Would you be able to buy out their share in the business?
•    If you were a shareholder when you died, would your dependents get a fair price?
•    Could a competitor buy into the business?
•    Could your credit terms worsen?
•    Would clients take longer to pay causing cash flow problems?
•    Would profits fall?
•    Could key relationships be lost?
•    Could the business cope if secured loans are recalled?
•    Would employees become unsettled and leave?

A Business Protection policy will essentially future-proof your company. So no matter how large or small you are, some kind of protection for your business is an essential commodity.

Also, once approved, if your company were to ever close down, you can transfer your policy to your new business.

Speak to Corinthian about protecting your business

What is Key Man insurance?

Key Man insurance is also known as Key Person insurance. It offers you a lump sum or a regular monthly income should a key member of your team need to take a sabbatical from work due to illness.

Why would I need this? This is one of the most popular types of Business Protection – and for good reason. Skilled work isn’t easily transferable to another member of staff. So if a key person did need to take a leave of absence, it might be harder than you think to find a replacement.

How will it help my business? Key Person insurance would safeguard any profit loss incurred during this period and could help to fund the replacement of this key individual. It would also assure your employees and customers alike that your business will be largely unaffected by the period of change.

With any form of Business Protection, you can decide whether you also wish to have cover should poor health prevent the individual from working. The chances of an individual becoming incapacitated can be 3 times greater than death. So covering Critical Illness needs some serious consideration, as the impact to the business could be the same.

What is Shareholder Protection?

In a nutshell, Shareholder Protection insurance will help you to keep control of your business in the event of a shareholder or business partners’ death.

Why would I need this? If you co-own your business, this is almost certainly something that you should consider. In the event of a business partner or shareholder’s death, shares in your business would automatically go to their next of kin, who may want to take an instrumental role in how your business is run.

How will it help my business? A Shareholder Protection policy ensures that the shares remain inside the business and instead, a lump sum is given to the next of kin.

What is Loan Protection?

If your business has a loan secured by an individual – such as a director – who then dies, that loan is likely to become payable straight away. Loan Protection will safeguard you against such an outcome, giving you a lump sum to use to pay off the remainder of the loan balance upon this key person’s death.

Why would I need this? With all the other impacts following the death of the individual who will most likely also be a key person, shareholder or both, trying to find the funds to repay the loan from existing resources will be a challenge for any business. The loan itself could be secured against their residential property and the implications for their family could be severe.

How will it help my business? Loan Protection will give peace of mind both to the business and to dependents. Should the unthinkable happen, you will all be covered.

So, how can I arrange Business Protection for my company?

Your best course of action would be to get in touch with an employee benefits consultancy, like Corinthian, who will talk you through your options for business protection.

Corinthian offers a fully-comprehensive service, covering all aspects of your Business Protection policy. Speak to a Corinthian advisor today and we’ll help you to decide:

•    What form of Business Protection is most important?
•    What level of Business Protection cover is needed?
•    How should it be structured?
•    What documentation is needed and how to complete it?
•    Which providers are most competitive and easiest to deal with?
•    Should a payment also be made on their incapacity or critical illness, not just on death?

Corinthian offers an on-going support package too. We’ll review the cover as your company’s needs change.

To find out more about what business protection your company should have, speak to a Corinthian advisor.