Business protection – what are the risks?

The loss of a loved one can be extremely difficult to come to terms with and whilst having a financial safety net in place won’t ease this pain, it can certainly give you one less thing to worry about.

For businesses, particularly smaller entities, having a contingency plan in place can provide real peace of mind, not only for the Director(s) and/or Shareholder(s) but also their employees.

Many smaller businesses rely on ‘key individuals’ to generate the profits and cash flow. These companies readily look to have cover in place for fire and/or flood protection, public liability or professional indemnity insurance to name a few.

Yet worryingly, few small businesses look to insure their most valuable assets, their people!

So, what risks do businesses face?


Whether it be a regularly used overdraft facility or bank lending, without readily available cash to repay these debts the business could face real challenges.

Personal Guarantees

Whilst having some life cover in place may not be a condition of the bank lending, many banks will protect their interest by way of a personal guarantee, perhaps the client’s biggest asset, their family home.

Director’s Loan Account

Almost one in three business owners are unaware that these loans have to be repaid in the event of the Director’s death.

Over Reliance on Key People

What would your business do if that key individual was no longer around? Would you have the resources to bring in a replacement? How long would it take to replace them? And at what cost?

No agreement in place

What is the valuation of your company? Where do your shares go on death? What if you suffer a Critical Illness? Would you want your family to receive the cash value of your shareholding? Would your co-shareholders want to keep control of the business?

Perhaps you’ve not considered putting an insurance policy in place to protect your business from these risks, perhaps no one has spoken to you about this type of arrangement or perhaps, you didn’t realise you could protect yourself (at least financially) from these risks.

Recent research states that 53% of small businesses would cease trading in under a year if they lost a key person, whilst over half of UK businesses have left no instructions in a Will or any special arrangements regarding shares.

Family businesses

Generally speaking a family business will provide the majority, if not all the income required to support the family. But what if there’s a problem? Long term sickness and incapacity could have serious repercussions on the income being generated. Research shows that in the UK only one in ten people protect their income, yet at least statistically, during your working life you are far more likely to be off work for two months or more than you are to die or suffer a critical illness.

Whilst some will say they could manage on their savings, the reality is that 46% of households have no savings or less than £1500. Tax efficient income replacement provided by your company could be a solution and provide valuable protection and peace of mind for you and your family.

If you think you or your business would benefit from a no obligation discussion about the risks and potential solutions for your business then please contact Nathan Douse FPFS via or a member of the financial planning team on 01772 821 021.