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Keyman Insurance – A Business Essential
By: Michael Challiner
If you own your own business, you'll have insurance in place for your buildings,
stock and vehicles, and you will be likely to have public liability insurance.
You may also be insured for professional indemnity and legal costs – but have
you considered insuring your most important assets – your key staff?
In the UK there are 3.9 million small, often family, businesses with up to four
employees – if one of those key staff were to die or fall seriously ill, it
could mean the end of the business, and this goes for limited companies,
partnerships and sole traders.
If you are one of those people then you should seriously consider Keyman
Insurance, and here's why. Keyman Insurance financially protects businesses from
the effects of serious illness or death of staff who are central to the success
of the company. It does this by providing cash when you need it most, so you can
cover loss of profits, inject more cash into the business, or take on temporary
staff.
There are actually four different types of Keyman Insurance:
• to help your business recover during the time that your key person is away
from work, or to train/take on somebody new;
• insurance against loss of profits;
• to provide protection for shareholders or partnership interests; and
• for people providing businesses loans or banking facilities.
1 Protecting your business if a key person is away from work
Your key people are the ones who are an essential driving force in your business
- the people who if they were away from work for a long period, your business
would suffer greatly. This could mean a reduction of sales and profits, or it
could mean your business is shaken to the core. Look at the Directors, Partners,
owners, think about your senior managers – every business is different but the
key people will soon become apparent to you.
Insuring these people will ensure that if they are ill or die, you will have the
cash you need to take on someone new, or train a replacement.
2 Keyman Insurance to insure against loss of profits
Losing key staff can have huge ramifications, if they are central to the success
of the business then their loss could leave you facing bankruptcy. It's a good
idea to insure against this possibility.
3 Keyman Insurance for Shareholders or Partners
In this case, the insurance will protect the company if shareholders or partners
become seriously ill or die. Families may want to sell their share in the
company which leaves the remaining members open to newcomers entering the
business. Keyman insurance schemes can be used to provide capital to purchase
the shares from the original shareholders or their estate.
4 Keyman Insurance insuring Guarantors
Many small and new businesses are required to provide a personal guarantee or a
charge on their personal property when they take out a loan. This especially
applies to small and new businesses. If one of these guarantors becomes
critically ill or dies, then the lenders may decide to recall the loan. Keyman
Insurance can protect you by paying off the loan and taking all the pressure off
the guarantor/guarantor's estate.
Most of the UK's top insurance companies offer Keyman Insurance as a natural
progression from their Life and Critical Illness Insurance provisions. They can
advise you further on what type of policy would be best for you.
So, the question is, can your business really afford NOT to have Keyman
Insurance?
About the Author:
Life Insurance Quotes from www.uk-life-insurance-coverFurther readingWhat is Life insurance
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