I had to drive down to London last month. Even when the weather is good, I don't like driving, but the rain, spray, and heavy traffic on the M1 made it hard. The heater kept me warm, and Radio 2 kept me company. Then I got stuck in that six-mile-long line, and I was soon an hour late.
When I got there, the accident was still being cleaned up. It was horrible. A truck and the parts of two cars that were left. Made me think, after all, I could have been in that situation. Yes, my life insurance and Will are both up to date. In fact, I just updated them last month. The family's needs would be met, and the mortgage would be paid off. Had I forgotten something?
The company. What would that lead to? We have an overdraft and a lot of insurance. We have two directors and seven employees. Insurance covers public liability, professional indemnity, vehicles, and stock. We even have insurance to cover legal costs. Had I forgotten something? I thought about it.
Good thing George wasn't in that accident. He's a great guy and has worked for us for five years. He sells the most for us. But what if it had been my co-director, who also owns 50 percent of the business? What would happen to the business because of it?
Sales are down, profits are down, and the bank is calling to ask about the Directors' guarantee on the overdraft. Then I would have to try to buy some of his stock. I wouldn't want those to fall into the wrong hands. At some point, I would have to hire someone of his calibre to keep the business going, which wouldn't be easy. And it doesn't come cheap to hire the best people. That means you'll have more time and money. The personal problems, the consequences, the extra work, the extra stress, and so on.
I don't even want to think about it. Quick, change the station to Radio 1.
Does all of this make you feel worried? 95.2% of UK businesses have less than 10 employees, and these are the businesses most likely to be hurt by the death or serious illness of a key person. There is a chance that a key person will get sick and stay sick for a long time or die. One in five men gets a serious illness before they should be able to retire. The M1 is another. So far, it hasn't happened, which could just mean that your business has been lucky.
Now, those actuarial geniuses who work for insurance companies think that risk and luck are two sides of the same coin. And they can cover most risks with insurance. In the end, they too want to sell more. But they don't know what to make of Keyman Insurance. Most of the 4.1 million small businesses in Britain should have it, but only a small number does. How does it work? It can be set up in a way that:
Give the company a way to make money while the key person can't work (compensation for the lost contribution from the Keyman)
Provide a lump sum to the business in case of death (pay off the overdraft or just boost cash flow?)
Give the remaining shareholders money so they can buy the original shareholder's shares from them or their estate.
All of these things can be insured, but you'll need to talk to a Financial Advisor about them. Can your business afford to take a risk it doesn't have to?
Note to self: I need to get Keyman Insurance!
