A study carried out among 500 UK business owners by Opinium on behalf of the insurer found 48 per cent of Britain's entrepreneurs said having business protection insurance in place gave them peace of mind, with a further 32 per cent stating the cover was the best one for them in the long-term.
However, despite acknowledging the benefits of business protection, 49 per cent of company owners admitted they had considered cancelling or not renewing their cover in the past.
Some cited the cost of premiums while others felt business changes meant the cover was no longer needed. A significant factor in retaining the policy was the intervention of professional advisers at the time of renewal, meaning the cover was kept in place.
Some 12 per cent said their personal financial adviser had recommended business protection to them, while a further 22 per cent said their cover had been put in place after advice from solicitors and the business's financial adviser.
According to Deepak Jobanputra, managing director at VitalityLife, business protection plays an "essential part in keeping companies afloat" if someone key to the business dies or becomes seriously ill.
He commented: "This research highlights the importance of supporting advisers in the crucial role of advising on and regularly reviewing business protection, to ensure it remains relevant as needs change. Reminding companies of the significance of the cover they have in place and why they bought it in the first place, can help keep valuable cover in place for the long term.”
When discussing the reasons firms had originally taken out business protection, 17 per cent said they had been worried about losing the business, with 14 per cent wanting to ensure the business would continue should anything happen to a key person.
Similarly, 9 per cent wanted to make sure the business would be passed to a specific family member, or the management team (8 per cent). A further 13 per cent had taken out cover after seeing what had happened to an unprotected business.
Andrew Wilkinson, director for insurance specialist Moneysworth, said: “In our experience, the businesses with the keenest interest in taking out protection tend to have a key person in their company who has experienced some level of ill health.
"These are the clients who are aware of the value of cover and that their policy benefits are protected against future health changes that might occur during the term of the policy. However, over time some businesses can forget the feeling that prompted them to take out cover in the first place, particularly if their circumstances have changed and they’re working hard to keep control of costs."
He added that, as the most important people within a business get older and, in turn, any health issues they might have become more serious or they might be diagnosed with new potentially significant health conditions, it can be too late to turn back the clock if cover has been cancelled.
This is why Mr Wilkinson believes that, as part of a regular review, it is essential for advisers to highlight the consequences to the business if a key person or shareholder passes away or becomes too ill to work.
simoney.kyriakou@ft.com
