Legal & General, a leading insurer, stresses the importance of income protection to small businesses.
Bonnie Burns, Legal & General’s Protection Product Marketing Director says, “ Business protection is different from individual protection. The main differences are that the business, or the other participants in the business own the policy, and the sums assured are often high.“
Research by Legal & General highlights that 100% of small to medium sized businesses believed they had at least one key person in their business whose death or serious illness would impact on company profits. Over half of those same businesses believed they could end up closing within one year of the death or serious illness of a key person. But amazingly, more than 70% of these businesses did not have any cover against the loss of future profit.
Legal & General offers three key types of business protection
- Key person
- Director or Partner share protection
- Business Loan protection
Bonnie Burns adds :”Premises can be rebuilt, plant or products replaced. But the death or absence through illness of a key person is not nearly as clear-cut. How costly would it be for a business to find someone to fill that gap, whether short or even long term?“
Key person protection is designed to provide a financial buffer in the event of a key person dying or becoming unable to make their normal contribution to the business. The cover is written on the life of the key person, but owned by the employer, so that any money due becomes payable to the business. This type of insurance can also be taken out against a business loan or overdraft. This covers the business against the loss of someone upon whom the business is dependent for repaying its loans.
Director or partner protection ensures that if a shareholder (or partner) dies then the surviving shareholders (or partners) can purchase the deceased’s share of the business. This would ensure business continuity and minimise disruption.
Insurance: News update: August 2007