Advisers must not ignore the value of business protection either for themselves or for their clients, Richard Kateley has claimed.
The head of specialist protection for Legal & General said he has often run training courses for new advisers.
Many of these have never known enough about business protection to recommend it to clients, so “education is critical”, Mr Kateley said, adding that some advisers do not even take out business protection themselves.
He said: “Many company owners think about insuring their building and contents – insuring their ‘things’ - but not about the people.
“It can be complicated, which is why advisers are invaluable in setting up key person cover, for example. But it is not as expensive as people think, and it can be crucial in making sure the business can continue.”
However, he added: “When we’ve surveyed small firms of all ilks in the past, 40 per cent of them admitted there was a high possibility of going out of business if they lost one key person.”
The FTSE 100 insurer surveyed 850 SMEs at the end of 2014 and found that although 57 per cent had taken out business borrowing, 31 per cent had no way of ensuring these debts could be paid off in the event the business owner or key person should die or fall critically ill.
Of those with an insurance policy, 89 per cent had taken it out because their financial adviser had made them aware of key person cover and its importance.
Last year, insurance consultancy F&TRC included business protection in its research tool to encourage more advisers to discuss this with clients.
Industry view
Brian Spence, partner for adviser business consultancy Harrison Spence, said: “As firms grow and take on more staff, then they need to have the appropriate protection in place.
“Generally they will act professionally and make sure the business can survive without a key individual.”
