More than three quarters of business owners of small and medium sized enterprises (SME) who purchased a business protection policy did so on an advised basis.
In a survey of more than 800 SMEs, Legal & General found 84 per cent of the firms' owners took out a business protection policy after speaking with a financial adviser or bank, with 75 per cent preferring to learn about protection from advisers and other financial professionals.
A quarter of the small businesses surveyed were referred to an adviser by their accountant or solicitor, while 19 per cent sought an adviser after attending a seminar.
Richard Kateley, head of intermediary development at Legal & General, said advisers have a vital role to play in raising awareness of the need for protection across the market.
He said: "There is a particular need to stress the importance of business protection and encourage Britain’s small businesses to protect what really matters – their people.
"The data really shows the valuable role that advice is playing to help close the business protection gap."
However, Mr Kateley warned there were still thousands of SMEs which were unaware of and unprotected by any form of business protection.
He said: "Advisers’ business connections can play a crucial role in eroding this lack of awareness and provide a beneficial source of new clients - most SMEs have an accountant or solicitor, so advisers should leverage their relationships with professionals like these to meet new clients and explain the undeniable value of business protection."
Victoria Slade, business protection expert at Drewberry, said clients often do not realise they have the option to protect their business in a similar manner to the way they would protect themselves.
She said: "I often get clients coming to me who only hear about key person insurance when it is mentioned by their bank in particular, often as a result of the bank providing funding, such as a business loan.
"There may be policies offered by banks and advisers at banks, but these rarely have access to the whole UK market - an independent insurance adviser with access to the whole market is generally the best way to buy this cover so you can be sure you're getting the best policy for your needs."
She added: "Clients also often come to me having been told that they need keyman insurance but the reality is that often business loan protection will be suitable."
She explained business loan protection typically decreases alongside an outstanding repayment loan, whereas keyman insurance is most commonly a level benefit that doesn't fall over time.
"If the policy is for a repayment business loan, this may be more suitable and save money in the long-run," she added.
rachel.addison@ft.com
