As a business owner, you will have insured against the usual perils associated
with your business, such as fire, theft and business interruption. Invariably,
however, the success of your business will depend not only on the physical
assets, but also the human assets…the key personnel.
Think about the key personnel within your business and consider the following
questions:
- If a key member of staff had died (or became seriously ill) yesterday,
what would be the financial impact on turnover or profitability?
- How long would it take to find a suitable replacement?
- How would the business fare in the interim period?
- What future projects would be affected by the death?
- What effect would the death have on productivity or delivery?
- How would any negative outcomes impact on customer goodwill?
- What impact would the death have on the workforce?
- What impact would the death have on business in relation to the deceased’s
dependants?
- What impact would a death have on any bank borrowings?
Your answers to these questions will depend upon the nature of your business,
but consider some of the implications.
- Profits may fall
- Creditworthiness could be affected
- Loans may have to be repaid if the key person was the guarantor
- Banks may be reticent to lend money
Many businesses will have key personnel but they become especially essential
in the following scenarios:
- New companies are often formed with people who have key skills which
together make the business. The loss of one of them could harm the new
enterprise before it starts.
- Management buy-outs are often dependent upon the managers themselves.
Although financial backers may require key person insurance to cover
the capital investment, this will not usually cover the profits lost
on the death of a key person.
- Trading companies which depend upon relationships built up by key
personnel may find their customer base disappearing on death of a key
person.
As a business owner you have to make decisions about risk all day, every
day. As you know, you can accept the risk (which can be costly), reduce
the risk (which can restrict growth and entrepreneurialism) or transfer
the risk to an insurer. The overall cost of providing for these eventualities
by transferring the risk to an insurer may be much lower than the risk
itself.
If the above applies to your business, why not give us a call for a brief
informal chat to consider your needs?
Contact us and we'll get in touch, or call
us direct on 01324 832 715.
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