The UK is home to around 5.7 million small and medium-sized enterprises (SMEs), which accounts for over 99% of all UK businesses [the usual definition of an SME is any business with fewer than 250 employees]. However, when Turner Little, company formation agents, scraped data from Companies House for insights in relation to company survival rates they found that roughly 80% of UK companies fail within their first year. According to the latest figures from the Office for National Statistics, only 43% of businesses in the UK survive for five years or more while almost exactly half of businesses in Britain survive their fourth year.

New businesses can fail for numerous reasons - from underestimating the competition to a lack of financial planning. The fact is, starting a business is a gamble and if you are a business owner it’s your job to weigh up the risks and manage these if you want your business to survive. However, when running a business, most owners are focussed on day-to-day delivery and doing the best by their customers. Unfortunately, this means they don’t always have the time to think about the ‘what-if’s’ or planning and being prepared for what may be around the corner, which could make all the difference to the success of the business.

Insurers can help you to identify the wide range of risks you face every day. They help you to put policies in place to manage those risks and prevent them from turning into serious setbacks. When problems do arise, insurers can provide financial help to continue doing business, and get you back on track.

In many small and medium-sized companies, the business relies on one or two key people - the business owners or founders, the top sales person, or a technical person such as a system developer or web designer. A key person is someone whose knowledge, work, or overall contribution is considered uniquely valuable to the company. A key person is someone whose absence from the business through death or the suffering of a critical illness or long-term disability, would have a serious effect on the future profits of the business. Although the number of key employees will vary from business to business, there will usually be at least one.

Sadly, the possibility of a key person dying or suffering a critical illness in your business is real – Royal London found that 3 in 10 (30%) of all small and medium enterprises (SMEs) had experienced the loss of a key employee for three months or more due to a serious illness. Statistically, if a business has five key people or shareholders in their early 40’s, there is a 39% chance one person will die before they reach 65.

Yet, despite this apparent risk Legal & General found that more than half of the businesses did not have Key Person Protection – it’s not something they had ever thought about!

As a result, many businesses are vulnerable to unfortunate shocks and unexpected costs and many companies are running the risk of severe disruption to business continuity without having cover in place.

A Key Person Protection policy can help protect the profits of a business directly attributed to one or more individual(s) if they were to die or be diagnosed with a terminal or critical illness (if chosen) during the policy term. This may allow a business to continue without financial hardship while a replacement is found, or an existing member of staff trained. It gives businesses breathing space to make the right decisions – not rushed ones.

Unlike a personal life insurance policy, the business pays the premiums, and it is the business which receives the lump sum benefit to cover its loss.

If the worst does happen, businesses could benefit greatly from a lump sum becoming available to stabilise cash flow and keep the business trading as normal.

The death and/or serious illness of a key employee could have serious financial consequences for any business – but without the correct planning, it can be disastrous for its survival. Our team of experts could help you identify the right type of protection insurance for your business needs and get your business covered – to find out more, why not contact us today? 0800 612 8005.