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?
- Borrowing – 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 with 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 haven’t 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.
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 email@example.com or a member of the financial planning team on 01772 821 021.