It’s important for businesses to insure their company’s property, equipment and fixed assets. However, it is far too common for businesses to overlook the people who drive the business. Many businesses fail to recognise the potential impact the death of a key employee, shareholder, or partner could have on the financial security of the business, not to mention on their surviving family.
It is common for business owners to become focussed on the day-to-day operations of their business and never considering a range of possible pitfalls that could occur. This is the type of insurance that nobody wants to consider and would hope to never need. However, if the worst should happen, having key person cover could make a huge difference.
We can assist you by reviewing the existing arrangements you have in place and make recommendations on how improvements can be made or provide advice on new cover that could be put in place.
The Potential Impact of Losing an Employee
Some employees are absolutely essential to a business and how it runs, making it difficult, if not impossible, to find a replacement for them in the short term. More than half of businesses think that they would stop operating within a year of a key person dying or suffering a severe illness as there would be a drop in revenue. When this unfortunate circumstance occurs an injection of cash is often required to allow the business to continue operations until a suitable replacement can be recruited.
A key director or employee suffering a serious illness or dying can have significant consequences for your business, resulting in;
- Loss of key clients
- Loss of profits
- Reduced capacity
- Reduced knowledge and practical skills
- The recall of loans
Key Person Continuity Protection
This type of cover is taken out on people regarded as key to the operation of the business, providing financial safety for the business in the event of their death or suffering a severe illness. The cash lump sum that this cover provides a business with can protect against potential financial losses that may be suffered, allowing the company to operate for a period with its finances being negatively impacted until a suitable replacement can be put in place.
If you’re unsure as to whether this type of protection is suitable for your business, ask yourself the following questions;
- Does a significant portion of your company’s profits come as a result of one or more key employee’s specialist knowledge or skills?
- Could the company recover from the loss of such an employee?
- Would a lump sum payment assist the company in recruiting a replacement?
- How long would it take a replacement to generate the same level of income?
If a key individual in your business has personally guaranteed loans dies before the loan has been repaid, the lender may recall the outstanding amount straight away. More than half of businesses have some form of debt, making it important to consider how your business would repay a loan of this type.
A loan protection policy repays business loans upon the death of the personal guarantor. This means the business is not at risk of the loan being recalled immediately following the change of ownership.
Shareholder and Partnership Protection
This ensures that the period following a shareholder’s death is as smooth and free of disruption as possible. This includes the writing of a number of legal agreements that detail how shares will be managed if a stakeholder dies. In the event of a shareholder dying the policy payouts can be used to buy the shares of the holder that passed away.
Relevant Life Plan
This type of plan, sometimes called Relevant Life Insurance, is a policy that is available to employers and provides individual ‘death in service’ benefits to directors and other eligible employees. This is a useful incentive when trying to attract and retain new members of staff. There are a number of tax benefits for both the employer and employee as premiums are paid by the business and offset as a business expense.
Kind Words from our Clients
I have always been impressed by his market knowledge , and desire to find solutions for retirement/investments that are best suited to our personal situation.
In addition,David helped to progress a critical illness claim after a fall at home 5 years ago ,resulting in premature retirement, when the company concerned was less than helpful initially.
His visits are always at a mutually suitable time and date , and David is a friendly and welcome visitor.
His investment suggestions and portfolio changes changes have proven to be good choices to date, and we look forward to David’s advice for years to come..
Dr A M
Dr M G
We feel that we can contact David and his office staff at anytime.
W. & M. R
When circumstances required prioritisation of attention and energy to other areas of our lives, it was reassuring to know he was continuing to monitor and review. He quickly responded to any questions we had and promptly dealt with matters which required attention.
The prospect of challenges ahead is less daunting, knowing that we have his continued support and interest in ensuring positive outcomes in our financial planning.
Dr B. B.
Miss A. M.
I would recommend him to anyone requiring impartial financial advice.
Mr W. O.
Mr J. S.
My association with David has become a working relationship where I am happy to share all my private and personal information, in return for the best financial advice available. His advice to date has proved to be sound and I am very pleased with the monies that my investments have accrued over this period.
Dealing with David also makes me relaxed, knowing that he understands my lifestyle, he provides me with individual attention by considering the fine details of my financial position, he considers my future requirements and he always emphasises the possible attached risks.
Honesty and integrity are important factors to me and Vance Financial Management are a company that I highly recommend.