The benefit of Keyman Insurance

by Michael Challiner

Business-owners know how important it is to be insured - buildings, stock and vehicles are the obvious choices, perhaps public liability insurance, quite possibly they'll have professional indemnity and legal costs covered – but how many businesses forget about their biggest asset – their key staff. With over 3.9 million small businesses in the UK, many of them family businesses with up to four employees, Keyman Insurance is an important consideration. It is likely that every one of those four staff will be crucial to the success of the business, and without them, the business would not be able to function. This applies to sole traders, limited companies and partnerships. The basic reason for having Keyman Insurance is that it provides a back-up plan for businesses that find themselves, due to serious illness or death, without one of their key staff. There are a number of ways in which this type of insurance can help you, and they are detailed below: There are four different types: • to give you a cash injection if a key person is seriously ill or dies, so you can bring someone else in to replace them; • to cover the reduction in profits; • to cover shareholders or partners concerns; and • to cover a business loan. 1 Key person seriously ill or dies If you think about it, whatever the size of your company, there will be a few people that are extremely important to the running of the business, some so much so, that the business might not be able to carry on without them. Their absence could result in loss of sales and profits, loss of direction, loss of key relationships with clients – so it's not just Directors, Partners and owners that are key, it could be any, or all, of your senior management team. Insure these people with Keyman Insurance and you can be sure that if they are kept away from work due to a serious illness, or if they die, you will have the cash to take someone else on of a similar calibre, or do whatever you need to do to keep the business afloat. 2 Loss of profits If one of your key people is critically ill or has died and they were central to the profit of the business, you could find yourself looking at the end of the road for the business. You can specifically cover yourself against loss of profits. 3 To cover Shareholders or Partners If a shareholder or partner becomes seriously ill or dies, their share in the business may pass to their next of kin. If their family doesn't want a share in the business, they could sell their share to the highest bidder, which could be a newcomer. With Keyman Insurance you will have the capital to ensure that you will be able to buy those shares. 4 To cover a business loan Many start-up and small businesses need a loan at some point, and often they will need to provide a personal guarantee on their personal property as collateral. If a guarantor dies, then the lenders are within their rights to recall the loan. Keyman Insurance would be able to cover the loan and pay it back, ensuring that the guarantor's estate is not affected by the loan. Keyman Insurance is available through most of the UK's top insurance companies as an add-on to life and critical illness insurance policies. For advice on what cover your business needs, talk to them about your options and individual requirements. If you don't already have Keyman Insurance, give it some serious thought – you may need it one day.

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