Business protection is a type of insurance that helps protect your business against possible financial losses when illness, injury or death affects you, as the owner, or your employees. By including Business protection in your business plan, you will ensure your business has the ability to continue to operate, even when faced with compromising circumstances.
Key person protection
Financially protect your business against the death or serious illness of a Key person:
> Key person protection allows a business to insure against the financial loss it may suffer if a key employee (also referred to as a ‘key person’) dies, is terminally ill or suffers a critical illness
> A key person is an individual whose skill, knowledge, experience or leadership contributes significantly to the company’s continued financial success
> You or your business will be the policy owner and the key person is the life assured. In the event of a claim, the business is protected and receives the proceeds.
Case study: the case for Key person protection
Andrew Chu is the Sales Director of Bright Sparks Ltd and has been with the company for five years. He has established a network of industry contacts and built strong business relationships with a number of Bright Sparks’ largest customers. He is essential to the success of the business. His basic salary is £130,000 per annum with a bonus of up to 50% of salary, dependent upon sales targets being met. Unexpectedly, Andrew suffers a serious heart attack and, sadly, dies.
With Key person protection in place:
> Two years ago, Bright Sparks took out key person cover on Andrew for a death benefit worth £700,000, based on a maximum of five times Andrew’s salary plus annual bonuses
> The policy was a short-term insurance lasting five years, and cost a premium of £58.54 per month
> Bright Sparks took out the key person insurance to cover any potential loss of profit caused by the loss of Andrew through serious illness or death, and to contribute towards the cost of recruiting a suitable replacement
> In addition, Bright Sparks also arranged ‘death in service’ benefits and a pension for Andrew’s wife and two children.
Without Key person protection:
> Although the company was in a healthy trading position, the loss of Andrew resulted in an estimated fall of 20% in profits for the financial year in which he died
> This put the company’s financial position at risk, significantly reducing the amount of share dividend to the shareholders.
Let us help you potentially avoid being in the same situation.