If you own your own business, you will have insurance for your buildings, inventory, and vehicles. You may also have insurance for public liability. You may also have insurance for professional liability and legal costs, but have you thought about insuring your most valuable assets, your key employees?
There are 3.9 million small businesses in the UK, most of which are family-run and have up to four employees. If one of their key employees died or got seriously sick, it could mean the end of the business. This is true for limited companies, partnerships, and sole traders.
If you are one of these people, you should really think about getting Keyman Insurance. Keyman Insurance protects businesses financially from the effects of a key employee's death or serious illness that could hurt the business. It does this by giving you money when you need it most, so you can make up for lost profits, put more money into the business, or hire temporary workers.
There are actually four kinds of Keyman Insurance, which are:
- To help your business recover while your key employee is out of the office, or to train or hire someone new;
Insurance against losing money;
- To protect the interests of shareholders or members of a partnership; and
- For people who give loans or banking services to businesses.
1 Keeping your business safe when a key person is out of the office
Your "key people" are the people who are very important to the success of your business. If they were out of the office for a long time, your business would suffer a lot. This could mean less sales and less money for your business, or it could shake your business to its core. Look at the Directors, Partners, and owners, and think about your senior managers. Each business is different, but it won't take long for you to figure out who the key people are.
If you insure these people, you will have the money you need if they get sick or die so you can hire someone new or train someone to take their place.
2 Keyman Insurance to protect against profit loss
Losing key employees can have huge effects. If they are essential to the success of the business, you could go bankrupt if you lose them. It would be smart to prepare for this possibility.
3 Insurance for Shareholders or Partners from Keyman
In this case, the insurance will protect the company if shareholders or partners get very sick or die. Families might want to sell their shares in the business, which would make it possible for new people to join. Keyman insurance plans can be used to get the money needed to buy shares from the original owners or their estates.
4 Keyman Insurance covers guaranteeing parties
When getting a loan, many small and new businesses have to give a personal guarantee or put a charge on their own property. This is important for small and new businesses in particular. If one of these guarantors gets very sick or dies, the loan could be taken back by the lender. Keyman insurance can protect you by paying off the loan and relieving the guarantor or the guarantor's estate of all the stress.
Most of the best insurance companies in the UK offer Keyman Insurance as a natural extension of their Life Insurance and Critical Illness Insurance. They can give you more information about what kind of policy is best for you.
So, the question is whether or not your business can really go without Keyman Insurance.
