Business protection is the key

By Mattioli Woods

21 Mar 2013

Protecting your business against the loss of any key person can be daunting. Where to start? Who is classed as a key person? What would the impact be to the business? What are the differing terms of policies? Keith Pressler from Taylor Patterson advises.

Protection can help the business from any financial fallout of any key person dying, falling terminally ill or, provided critical illness cover has been taken as an optional extra, falling critically ill during the term of the plan.

Whether they provide knowledge, key contacts or other assets such as funding, losing a key person can be detrimental to any organisation. The business could be hit by a reduction in sales resulting in loss of profit, not to mention the potential recruitment and training costs that could be incurred to hire a replacement, these are just a few of the pitfalls that need to be considered.

So what types of business protection exist?

Key person InsuranceSometimes the hardest question to ask is who is identified as a ‘key person? Common examples include, managing director, finance director, sales director, technology specialists or other staff with specialist skills.

Knowledge and relationships are fundamental to the running of any business and if someone with this level of skill passes away the economic impact can be devastating. Having a plan in place for this can be the key to survival for a business. If anything unfortunate were to happen the insurance policy pays out a lump sum to financially recompense the business and stabilise it in a period of uncertainty.

Depending on the level of cover, individuals may need to review internal policies such as travel in order to reduce levels of risk. For example, if 5 key personnel are all travelling together and something unfortunate happens, the level of risk is quite high, certain plans may request the risk is mitigated by only 2 members of staff travelling together in certain circumstances,

However, it’s interesting to note that not all key people will be shareholders within a business, so how can shareholders be protected?

Shareholder protectionAlthough shareholders may not possess a specialist skill, they do hold an influence in the direction of a business. If a shareholder were to pass away, the remaining shareholders may not want the shares passing to a non business related person such as family relatives with little or no understanding of the business.

In cases like this the insurance policy ensures the shares revert back to the business, with the spouse/partner getting the cash lump sum of the value of the shares. Legal advice is necessary to draw up a shareholder agreement in these circumstances so organisations have the option of how those shares will be divided upon death.

Whatever policy is put into place it is worth reviewing annually. Not only do insurance policies and terms change, rates can go up and down dependent on market conditions. Just as policies can change, the value of the business will also vary so policies might not be up to date with current value. If key personnel have received training over the time period, their knowledge and expertise might mean the business needs more financial compensation upon unfortunate events.

Latest news

1

Blackpool approves plans for pair of apartment complexes New South Promenade Apartments Visuals

Blackpool approves plans for pair of apartment complexes

12 Apr 2024

2

Distinguished engineer takes senior role at Lancaster University Rebecca Lingwood

Distinguished engineer takes senior role at Lancaster University

11 Apr 2024

3

International building supplies firm to open new plant in Preston New Kerakoll Group Premises Visuals

International building supplies firm to open new plant in Preston

11 Apr 2024

4

Case Study: RfM Transform and Belgravia Décor HR Trends from RfM Transform (13).png.png

Case Study: RfM Transform and Belgravia Décor

12 Apr 2024

5

Lustalux helps with the £21m refurbishment of Printworks Manchester pw-sign-manchester.jpg.jpg

Lustalux helps with the £21m refurbishment of Printworks Manchester

12 Apr 2024

Hwc 2024 Email Signature 980x120
Background image for hub sign up block

LBV Hub

Reach 50,000 members of the Lancashire business community

Post your news
Post your events
Post your offers
Company profile
Social reach
Magazine coverage
Sign-up
Events
Health and Wellbeing Conference 2024
Hwc 2024 Social Media 1200px 1
Networking
23 Apr 2024

Health and Wellbeing Conference 2024

Crow Wood Hotel, Burnley , BB12 0RT

08:30 - 13:00

Help to Grow Management Course
HTG2.png.png
LBV Hub Seminars
15 Apr 2024 - 17 Jul 2024

Help to Grow Management Course

Preston Campus , Preston , PR1 2HE

09:30 - 14:00

Business Networking in Chorley - BNI Endeavour
EVENT LISTING SIZING Endeavour.png.png
LBV Hub Networking
16 Apr 2024

Business Networking in Chorley - BNI Endeavour

Oak Royal, Bury Lane, Chorley, PR6 8SW

06:30 - 08:30

Business Networking in Blackburn - BNI Vista
EVENT LISTING SIZING Vista.png.png
LBV Hub Networking
16 Apr 2024

Business Networking in Blackburn - BNI Vista

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:45 - 08:30

Business Networking in Lancaster - Eden Business Network
EVENT LISTING Eden Business Network.png.png
LBV Hub Networking
17 Apr 2024

Business Networking in Lancaster - Eden Business Network

The Borough, 3 Dalton Square, Lancaster, LA1 1PP

18:30 - 20:30

Business Networking in Accrington - BNI Zeus
EVENT LISTING SIZING Zeus.png.png
LBV Hub Networking
17 Apr 2024

Business Networking in Accrington - BNI Zeus

The Mill House, Corn Mill Yard, Accrington, BB5 5HX

06:45 - 08:30

Business Networking in Preston - BNI Diamond
EVENT LISTING BNI Diamond.png.png
LBV Hub Networking
17 Apr 2024

Business Networking in Preston - BNI Diamond

The Marriot Hotel, Garstang Road, Broughton, PR3 5JB

07:15 - 09:00

Business Networking in Burnley - BNI Kudos
EVENT LISTING BNI Kudos.png.png
LBV Hub Networking
18 Apr 2024

Business Networking in Burnley - BNI Kudos

Prairie Sports Village, Windemere Avenue, Burnley, BB10 2FU

06:45 - 08:30

Cyber Secure 360: Safeguarding Your Digital World
CyberSecure 360 LBV-32.png.png
LBV Hub Seminars
18 Apr 2024 - 18 Apr 2024

Cyber Secure 360: Safeguarding Your Digital World

Accrington Stanley, Accrington, BB5 5BX

08:30 - 12:00

Business Networking in Preston- BNI Brunch
EVENT LISTING SIZING Brunch .png.png
LBV Hub Networking
19 Apr 2024

Business Networking in Preston- BNI Brunch

Samlesbury Preston Hotel, Preston New Road, Preston, PR5 0UL

09:30 - 11:00

The Pro Club
Untitled design (6).png.png
LBV Hub Networking
19 Apr 2024

The Pro Club

Fraser House, Lancaster, LA1 4XQ

09:30 - 12:30

Business Networking in Blackburn - BNI Infinity
EVENT LISTING BNI Infinity.png.png
LBV Hub Networking
19 Apr 2024

Business Networking in Blackburn - BNI Infinity

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:30 - 08:30

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more Lbv115 Online Graphic
Subscribe now

Weekly news bulletin