Taking care of number one

This year several companies have launched business protection products or stepped up their promotion of existing propositions. With the credit crunch affecting mortgage protection sales more advisers are looking at the opportunities afforded by developing their skills in this market.

But despite often very convincing arguments as to why they should be protected only a fraction of UK companies have any form of keyperson life cover. And even less have any keyperson critical illness cover or permanent health insurance.

Why should this be? One reason may be that they do not appreciate the need. But in many ways businesses already acknowledge the problems which they may face if a key individual leaves.

Pick up a copy of any of the recruitment supplements given away in national newspapers and read some of the job adverts. All of the adverts for key positions describe the excellent salary the successful applicant will earn. It also describes the company car, subsidised mortgage and health care and pension scheme.

These packages are designed not only to attract the best-qualified staff but also to ensure that those people remain in the position. If one of these executives received a better offer from a competitor, it is likely they would be offered a financial incentive to stay.

So the business is effectively insuring itself from a key individual leaving of their own free will. Surely it would be willing to pay a similar financial amount to protect itself against the financial consequences of that person leaving through critical illness or death?

The ability to paint pictures such as this and back them up with strong advice is one of the main reasons advisers should be interested in the business protection market. It is totally advice-driven.

The way that the industry promotes business protection perhaps creates the impression that it is all about very high keyperson sums and intricate partnership and shareholder protection schemes. But we should not forget the often-overlooked sole trader.

The managing director of a company may be persuaded that he should consider protecting his business against the financial problems associated with the loss of a key person, for example the sales director. It is possible, however, that he might feel such insurance is unnecessary, and that the company would pull together in the face of such a calamity and get itself through the crisis.

But no such room for manoeuvre exists in the sole trader's business because he or she is the business - in fact he or she is the archetypal keyperson.

Protection is essential not only to safeguard the future of the business and that of any employees, but also to safeguard the future financial stability of the sole trader's family. Nowhere else are business and personal protection needs so perfectly interwoven.