Many businesses focus on protecting their physical assets and may often overlook the protection of their owners and key people. The death or critical illness of a business owner or key person is likely to destabilise the company’s ability to produce income and, ultimately, survive.
Business protection can cover a business’s liabilities, key people, and shareholders.
The sudden loss of a key individual can disrupt a company for several years, but business protection can minimise the interruption to your business. It provides a cash injection at a critical time to help replace the key individual, repayment of debt and loss of profit.
Who is a key person? A key person is anyone whose loss would affect the business’s ability to maintain turnover or generate profits. For example your top sales person, operations managers or directors, product developers, or even the business owners/managing directors.
Spend a few moments considering your key workers – what impact would an untimely death or critical illness have on your operating future? What would the cost be to replace them without disrupting the smooth running of the business?
When a key person dies, suffers a critical illness, or is subject to long-term illness or disability, they often need to be replaced temporarily or permanently. Recruitment can be expensive, and it can take a long time. The loss of revenue caused by the disruption may hinder the businesses ability to repay its loans and other liabilities, a responsibility that often rests with its owners. Key person cover helps maintain the confidence of a business’s customers, suppliers, and lenders.
You must first identify your key people by assessing their skills, knowledge, and leadership impact as a business. Each key person’s contribution to profit then needs to be quantified. This is combined with replacement costs and the business’s liabilities to determine a suitable sum assured. We have the tools and experience to help your business quantify the level of cover required.
What is Personal Protection? Protecting those around you
There are various forms of personal cover, and the main types of policies are life cover, critical illness and income protection. Understanding your financial position, commitments, and future objectives is key to determining the right blend of cover you require. Your and your family’s needs may change over time, so this should remain under review.
One way to determine whether or not you need personal protection is to consider your financial obligations and contributions and the impact on your loved ones if you were no longer around or unable to work due to illness/injury. Ask yourself will any death-in-service entitlement and savings you have be adequate to cover mortgages/debt and support your loved ones for any meaningful time. As well as the essentials, there are a surprising number of contractual expenses like the cost of running a home, other insurance policies, and raising a child to adulthood which contributes to the cost of living that you may overlook.
How long will your employer pay your salary if you cannot work?
Whatever the answer is, you can get a minimum of £96.35 per week Statutory Sick Pay (SSP) if you’re too ill to work for up to 28 weeks. After that, you may be eligible for other state benefits such as Universal Credit and Employment & Support Allowance.
Ask your employer or look at your staff handbook to see how long your salary will continue should you be unable to work.
Why Critical Illness cover is so important
Today, more people live longer and survive illnesses such as cancer, heart attacks, and strokes. Thankfully. every year the number of people surviving cancer increases, and over the last 40 years, the cancer survival rate has doubledi. Although people live longer, they live a more significant proportion of their lives in poor health. As a result, many people may suffer from multiple serious illnesses over their lifetime.
Protect your Income
If you can’t work because of illness, injury, or disability, Income Protection will cover your salary and help you recover and settle back into work for the life of the policy. From mobile phones and pets to cars and even TV’s, people protect everything except themselves, their lifestyle and what pays for it. For example, people are four times more likely to have pet insurance than income protectionii. How can you pay for everything else if you don’t insure your income?
Your income should be one of the first things you consider protecting to help ensure your monthly outgoings are covered if you suffer an illness, injury or disability that prevents you from working.
Have you made the right plans for a secure financial future?
Start talking to us today about your future financial plan, and we can help make sure it is a resilient one. We take the time to understand your goals and objectives to ensure our advice is specific to your needs and aspirations – helping you build a brighter and more secure financial future. We have proven experience delivering financial plans for individuals, families, trusts and companies. To discuss your circumstances in confidence, please contact us on 0131 514 2770 or email wealthplanning@waverton.co.uk to arrange a no-obligation meeting.
