If your business owns plant or machinery worth tens or hundreds of thousands of pounds, it is to forget your businesses biggest assets are actually its people. If an essential piece of machinery breaks down, the productivity of your business can often grind to a halt, but the same is true for key members of your business.
Customer relations can easily become strained if a key individual is away from work for an extended period. If that person is unable to return to work due to poor health, or passes away, this could have a severe detrimental effect on your business.
If your business has loans, it is also possible that your creditors will panic and recall the loans early to protect themselves against the potential failure of your business, which places additional stress on the company at a time in which it is already struggling.
Protecting your Business
Fortunately there is a safety net that your business can employ to protect itself from such a scenario, Business Protection Insurance can provide protection from the loss of a key person either by death or serious illness. In the event of the named individual being unable to work due to serious illness, or death, the company will receive a tax-free payout to help offset lost revenues.
Key person insurance is particularly valuable for small businesses where the named individual is that companies only employee. It’s worth bearing in mind though, that business protection insurance is intended to benefit the company rather than the family of its director. For this reason, it may be wise to consider taking out life insurance alongside key person insurance.
If your business has several shareholders, then shareholder protection could also be of benefit to you. In the event of one of your shareholders dying, shareholder protection insurance will ensure that the remaining shareholders receive the necessary funds to enable them to purchase the deceased shareholders shares.
Loan Repayment Insurance
While some banks require companies to take out loan repayment insurance as a condition of providing credit, it’s always a good idea to protect your business anyway. The loss of a key person could mean your business is unable to make good on its loan repayment obligations, and interest charged on overdue repayments can quickly snowball into an unmanageable debt.
The Benefits Business Protection Insurance
Business protection insurance can provide numerous benefits. Shares being made available on the open market provide new investors with the opportunity to buy into your company. This often leads to instability for the existing shareholders, as it could result in a new majority shareholder taking control. Shareholder protection insurance, together with the relevant cross option agreements,could prevent this scenario from ever becoming a reality.
Furthermore the business is protected against any damage caused by the inability to honour existing loans in the event of losing a key person. The company does not need to worry about existing creditors becoming nervous and calling in outstanding balances immediately.