Q: Getting your business insurance in place

There are so many forms of business insurance. Which of them does my business need?

smallbusiness 28/07/2016

There are so many forms of business insurance. Which of them does my business need?

Expert Answer

SMEs are the backbone of the UK economy and as such need to protect themselves and their employees. Most will have insurance for what they can see and feel – their contents, their building, their cars or fleet – but many forget or don’t even consider their human capital, their loans and their debt.

The loss of a Key Person, for instance, could put the very survival of a business at risk. Legal & General research has shown that as much as 40 per cent of businesses would cease trading in under one year if a Key Person died or became critically ill, yet 57 per cent of businesses do not have Key Person cover to protect them should this happen.

A critical illness or death is sadly not something you can predict and so to have insurance if this does occur is vital. This protects not only the business but the staff who are employed, as it allows the business to continue and for those jobs to be kept.

Another really important form of insurance which SME business owners and sole traders really need to consider is loan protection. One-third of UK SMEs have no insurance cover at all for their debts, despite the fact that nearly two-thirds of businesses carry some form of debt and the average SME owes nearly £350,000 at any one time.

If a Key Person was to fall critically ill or die, this could present some businesses with extreme financial complications. Business loan cover can protect organisations when faced with the inability to repay loans, helping to pay back any outstanding loans and safeguarding the business owner’s personal wealth.

Our research did show that of those business that we spoken with who did have some form of business protection, the 89 per cent did so because they were advised to do so. Professional advice in this field and around something so important is crucial and I would advise business owners to discuss with a financial adviser how best they can protect their organisation and employees.

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