Preparing your business for any and all threats

By now, many of you have probably heard there is something called COVID-19 spreading globally. Fortunately, in the UK, those that can are heeding Government advice and are working from home and for many it’s still business as usual.

Here at Informed Financial Planning, we hope the impact to businesses and their employees is minimal and, with the fantastic community spirit already shown, some normality will resume shortly.

However, even after COVID-19 is sent packing, other threats to businesses are here to stay.

You can have the best product or service on the planet, but the reality is businesses are built around their employees. Many businesses have not considered the financial strain that would be experienced if one, or perhaps more, of their key employees were to pass away or suffer from a critical illness.

It is estimated that 52% of businesses would struggle to survive for longer than 12 months, if the worst were to happen to one of their key individuals. This timescale, worryingly, decreases to 6 months for new businesses.

  • How would the death of one of your employees, directors or shareholders impact your business?
  • Would it impact your cash flow?
  • Would your business’ reputation be impacted?
  • Would you still be able to fulfil, or even retain, your existing contracts?

These are just some of the questions that should be asked when assessing the risk to your business.

Fortunately, by taking out Key Person Insurance, the continuity of the business can be protected in the event of an employee’s death or them suffering from a critical illness, such as cancer. This insurance could provide a vital injection of capital to help your business identify and train a replacement team member or even replace any lost profits.

“But how much is it going to cost me? Surely the premium will be sky high?”

When asking business owners to estimate the costs of key person insurance, they usually overestimate. On average, their estimates are three times the cost of the actual premium!

The below table provides some estimated monthly costs of this insurance.

 

Cover Basis

£100,000 Life Cover

£100,000 Life and Critical Illness Cover

£200,000 Life Cover

£200,000 Life and Critical Illness Cover

£300,000 Life Cover

£300,000 Life and Critical Illness Cover

Age

35

£5.87

£22.53

£7.95

£41.65

£10.49

£59.42

45

£8.98

£45.95

£13.52

£84.76

£18.46

£122.37

55

£16.68

£97.62

£28.13

£190.32

£38.71

£282.37

Please note, these are based on the standard premiums available for a five-year insurance plan for an individual who is a non-smoker and in good health. These premiums are not guaranteed and could change following medical underwriting. These estimates are examples only and do not constitute a recommendation. 

For a relatively low cost, this insurance could provide the lifeline your business requires if the worst were to happen.

If you would like to discuss insuring any of your key members of staff, please give us a call.

Whilst we cannot facilitate face to face meetings at the moment, we are still fully operational and all advisers can organise meetings via Zoom, Skype or over the phone.


All statistics taken from Legal and General’s ‘State of the Nation Report’, 2019

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