Business protection policies are, in essence, survival policies for a company.
Whether the firm is a small, one-person start-up operating from a home office, or a large entity with 200 staff, a new firm or a well-established one, putting some form of cover in place should be business critical.
For many business owners, careful thought is already given to protecting things such as the premises and the contents thereof, the machinery, stock, the intellectual property and the company car or van.
As Johnny Timpson, protection specialist for Scottish Widows, says: "Business owners already protect many of the important assets that are essential to keeping their businesses running smoothly.”
But there is another aspect which business owners are not always considering. “When talking about business protection”, he continues, “we are talking about risk management and solutions, particularly the awareness and management of ownership, loss of profit, liability and people attraction/retention risks.”
This seems such an important list of risks to insure against – so why does there seem to be a lack of thought given to business protection policies, whether these are key person cover or executive income protection?
Recent research carried out by Legal & General through the British Chambers of Commerce, identified a £1.1trn gap in business protection in the UK.
The study found that 61 per cent of business owners felt that the death or critical illness of a business owner would have a serious impact on business, yet only 43 per cent of those asked had any life cover in place.
The survey of more than 500 firms highlighted that 95 per cent of businesses have at least one key individual.
However, the majority of firms admitted they had no contingency plans in place to deal with the death or serious illness of that individual.
A further 39 per cent of respondents believed their business would fold within 18 months following the death or critical illness of a key individual.
This is not merely the flight of fancy of business owners. Figures from the Office for National Statistics have revealed that, in the UK in 2016:
- An estimated 137.3m working days were lost due to sickness or injury.
- This is equivalent to 4.3 days for each worker.
- Groups who experienced the highest rates of sickness absence were women, older workers, those with long-term health conditions, smokers, public health sector workers and those working in the largest organisations (those with 500 or more employees).
- Coughs and colds were the biggest reason for absence, followed by musculo-skeletal and then by mental health and neurological reasons.
The good news is the 137.3m lost days is the lowest recorded since the series began in 1993, when it was at 7.2 days per worker.
The better news is, the loss to the business of having key members of staff signed off work for long periods of time (or indefinitely), can be insured against.
“Businesses of any size face these risks day in, day out, and they can either choose to manage them consciously, by deciding to self-insure or reinsure them, or unconsciously, by ignoring and, by default, self-insuring them,” says Mr Timpson.