Advertorial
Yet, research by LV= shows just 10% of small and medium sized enterprises (SMEs) have protection, leaving almost 4 million businesses financially vulnerable.
Advisers tell us Business Protection can be more difficult to write compared to personal cover.
Larger cases slow down the underwriting process, and trusts can seem complicated. But, Business Protection is just simply life insurance and critical illness cover, written on the life a business owner, or key employee.
An easy way to position Business Protection with your clients
At LV=, we encourage advisers to think of Business Protection as insurance that safeguards three core business elements:
Ownership - If a partner or shareholder dies (or is diagnosed with a critical illness), the proceeds help the remaining owners buy the affected business shares.
Without protection, the surviving owners could lose control of the business, impacting ongoing success. Business Protection to protect ownership is written as Share or Partnership Protection.
Profit - If a business loses a key person who influences revenue, the policy gives the firm a cash injection, helping replace lost profits and possibly recruit a replacement. Key Person cover can be used to protect profits.
Debt – Key Person cover can also be used to clear debt (sometimes called loan protection). Without a cash injection, investors and creditors (like the bank) may call in debts they think the business can’t pay them off.
Not to be forgotten, Relevant Life Cover is a tax-efficient life insurance policy, allowing SMEs to offer death-in-service benefits to their staff.
Build your credibility
Before meeting with clients, it’s important to understand the different legal business structures, as this will influence how you write the cover. Having a basic understanding of your client’s business will also demonstrate your credibility and give your advice further kudos.
Sole traders (or the self-employed)
This is the simplest type of business, which is owned and controlled by one person (who might have staff). If your client’s business is new, they’re likely to be a sole trader as most firms start-up in this way.
The sole trader is personally responsible for all debts – if they die, this is inherited by their family. Key Person cover should be used to protect profits and pay off loans.
Some advisers struggle to find Business Protection clients, but with more than 4.6 million self-employed people in the UK, it’s possible you have a lucrative back book.
Traditional or ordinary partnerships
This is a business owned by one or more partners, working together with a view to make a profit. Like sole traders, the partners are personally liable for all business debt, so Key Person cover should be considered as well as partnership protection.
Limited Liability Partnerships (LLPs)
Unlike sole traders and partnerships, the owners are only responsible for the amount of money they’ve invested into the business. LLPs can own property, like an insurance policy, and Key Person cover can be used to protect profits or pay off debt.
Partnership Protection can also safeguard ownership.
Limited companies
These are companies owned by shareholders and run by directors. Key Person cover can sustain profits or clear debt, and Share Protection can protect ownership.
Taking the hard work out of Business Protection
We know even the most experienced adviser has questions from time to time, so we have invested in comprehensive Business Protection training for all our service teams. We can advise you on how to write the cover and which trust forms to use.
Our flexible approach to underwriting and generous financial limits can help you write the cover faster, even with larger cases. Did you know we only need financial evidence for life insurance above £3.5 million?
A tool to handle ‘it won’t happen to me’
Client aempathy isn’t unique to personal protection. Our research shows 29% of businesses don’t think they need protection, despite almost a quarter of firms with cover have made a claim. If you find it challenging to convince your clients about the need and value of protection, then check out our Business Risk Calculator.
This is the only tool that can help you calculate the risk of business owners (and key people) dying or being diagnosed with a critical illness before retirement. The results also show the financial impact on the business, and are particularly powerful at group level when talking about Share and Partnership Protection.
And there’s more. To support your recommendation further, we’ve developed jargon-free, client-facing literature to help you introduce and explain Business Protection.
And we’ve kept our business and personal cover policy conditions completely separate, as we think you (and your clients) will find this approach easier to understand.
Added value benefits that make a difference
Running a business is difficult enough, without having to worry about legal issues. So we’ve partnered with a firm of business solicitors to offer your clients access to a free legal advice line.
This 24/7 service offers advice on a wide range of commercial issues, including HR and contracts. 68% of businesses that pay for comparable services find them valuable – and with LV=, this comes for free.
It’s easy to say, but protecting business clients is worth the time and effort, and our refreshing approach offers a compelling choice for you and your clients. With a little time (and support from us) we’re certain Business Protection will become a valuable part of your own business if it isn’t already.
Marcus Primhak is Business Protection Manager at LV=
