Business protection, or Key Person Insurance as it’s also known, is insurance that helps protect a business against the financial effects of a key person being diagnosed with a critical illness or dying.
When you consider that for the majority of businesses, their most valuable asset is there people, by not taking out business protection, they are risking their entire operation and all the people who help make it what it is.
That’s why new research from VitalityLife, which shows that almost half (49%) of companies with business protection in place have considered cancelling their cover in the past, is cause for concern.
According to the survey, the main reasons why businesses have considered cancelling their policies include: the cost of premiums (13%), trying to save on running costs (9%) and money being tight (9%).
A further 9% said business protection was no longer relevant following changes to their business, with 7% saying cover was simply no longer needed.
Why firms take out business protection
When quizzed about their reasons for taking out business protection in the first place, 17% of companies said it was because they were worried about losing the business. A further 14% said they wanted to ensure the business would continue should anything happen to a key individual.
Sticking with the theme of business continuity, 9% said they wanted to ensure the business would be passed to a specific family member and 8% to the management team. A further 13% admitted they had taken out cover after witnessing what had happened to a similar unprotected business.
The benefits of business protection
In terms of the main benefits of having business protection, peace of mind was highlighted as number one, cited by 48% of companies. Almost a third (32%) said business protection is the product they believe best protects them for the long term.
Just under a quarter (23%) said their business protection cover represents good value for money, while slightly less (20%) said their annual premiums aren’t high compared to other business operating costs.
Separate research released by VitalityLife in January 2020 showed that business protection is becoming more popular, with 24% of advisers polled saying they have seen demand for business protection increase in the last 5 years. Advisers say this is down to the fact that more businesses are aware of the need for protection, plus a rise in the number of SMEs and the self-employed. Changes to legislation that brought about tax-efficient life cover products has also played a role.
Speaking about the findings of the more recent research, Deepak Jobanputra, managing director at VitalityLife, said: “This research highlights the importance of supporting advisers in the crucial role of advising on and regularly reviewing business protection, to ensure it remains relevant as needs change. Reminding companies of the significance of the cover they have in place and why they bought it in the first place, can help keep valuable cover in place for the long term.”
Are you prepared for the unexpected and could your business survive if a key person died or became seriously ill? In many cases, the answer is no and when preparing your business plan for the next 3–5 years and beyond, business continuity and protection should be a key consideration.
At Premier Choice, we offer full support and service to identify the missing links and put in place a robust plan of action. Get in touch if you would like to know more!
I joined Premier Choice Group as an SME/Corporate Consultant in 2017 and look after the Healthcare & Protection needs of a nationwide portfolio. I began my career in Healthcare and Protection in 1985 with BUPA, before moving on to Royal & Sun Alliance. In 2002, I became an Intermediary and worked with Private Clients, SME’s and Corporate clients on a local, national and international basis.