Protecting key employees is vital to securing your business’s future

As a business owner considering taking out insurance, it would be easy to think only of your premises, the computers and technology within them, and any vehicles which aid your day-to-day operations. However when it comes to insuring the most essential part of any business – the employees – many business owners are not taking enough caution and may be unaware that they can insure a key person.

Every firm, no matter how big or small, will have certain key employees who are crucial to the business. A key employee is someone whose death or long-term absence as a result of a critical illness would cause a significant financial and operational impact upon the business. It’s not an easy thing to consider, but what would happen if your sales director sadly fell ill or died? Could that jeopardise successful client relationships which, ultimately, would have to be rebuilt if you had to employ a replacement?

Research by Legal & General found that four out of ten SMEs would cease trading within a year if they lost a key employee, and worryingly near two-thirds of sole traders would have to end their operations immediately. These statistics, from our State of the Nation survey of over 750 business owners, are of real concern given the importance of small and medium-sized businesses to the UK economy and the millions of people they employ up and down the country.

To help secure the future of your business should the worst happen, as an SME owner you should consider protecting your key employees to put your company in the best possible position to react to the impact of losing an essential member of staff. Computers and vehicles can be replaced, and are likely to be insured, but recruiting the right employee to replace a key person is an altogether different matter. Not only can it take time to find the suitable individual, but there can also be considerable cost involved in recruiting that person and training them to their predecessor’s standard.

Tragic events like these will always be a shock, but it’s important to have a sound financial plan in place to minimise the impact of the loss of a key employee. As part of this, business owners should speak with their financial adviser about the different types of business protection insurance that exist and which would best suit them.

It is all too easy to side-line issues such as these as they are not nice topics to think about or conversations to have. However it is vital that they are addressed as the loss of a key employee could place a business in serious financial trouble and risk the jobs of those employees whose livelihoods rely on the business being operational. Unfortunately an employee suffering from a critical illness or dying is an all-too common occurrence making it essential that SME owners discuss these issues with an adviser at the very start of the business lifecycle, to put in place these vital protection policies to cover these truly unforeseen events. The death of a key employee can put terminal pressure on a business, but having a simple life policy can mean securing  not only the business but all those who work for it and those who trade with it.

By Richard Kateley, head of intermediary development at Legal & General

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