Businesses not up to speed on business protection insurance

More than half of small companies would have to cease trading if they lost one or more key people to illness, long-term incapacity or death, research finds.

However, just one in six (17 per cent) have insurance in place to protect against such a loss, according to a study by Scottish Widows.

More than three quarters (79 per cent) of SME respondents believe there is at least one employee in their organisation whose loss through death, critical illness or long-term incapacity would seriously impact the profitability or survival of the business.

Despite this risk, 77 per cent admit to never having sought any advice on business protection insurance.

Nearly 70 per cent of companies identify ‘delivering on commitments and promises to customers’ as the most important aspect of their business and top of the list for a third (32 per cent) of firms is the need to cover their fixed overheads.

In contrast, insuring against the death of a key person is picked out by just 3 per cent as their biggest priority. The results are almost identical when it came to insuring against a key person suffering a critical illness or long-term incapacity.

Katya MacLean, protection specialist at Scottish Widows says, ‘Attracting customers and keeping them happy should always be a company’s priority, likewise insuring premises and the equipment that keeps it going.

‘However, while business protection insurance for staff is rarely a priority, its absence can be the biggest single risk to the profitability and even the very existence of a business – especially for small and medium sized companies where the relative impact will be that much greater.’

The top priorities listed by respondents are delivering on commitments and promises to customers (chosen by 68 per cent), having good customer relations (61 per cent) and making a profit (48 per cent).

These are followed by surviving the current ecomomic climate (38 per cent) and covering fixed costs (32 per cent).

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