The importance of Business Protection
Business interruption from loss of key people or shareholders, is something which can strike unexpectedly at any time. Alex McNiven at Employee Benefit specialists, Broadstone Financial Solutions, discusses the reasons for having business protection in place.
Put simply, business protection is a group of insurance covers that ensure if the worst were to happen to certain people in your organisation, your business has the financial means to ride out the storm. Below we’ll look at two examples of business protection insurance covers that can provide an invaluable safety net:
Key Person Insurance
Often businesses are reliant on certain key people that are pivotal to their success. Without them, the short-term future will be challenging and not uncommonly, there may be no long-term future for the business at all, such is the importance of their key individuals.
The staple of any business protection arrangement is to implement a Key Person Insurance cover to ensure the business is protected against the death or critical illness of their key people.
What sort of impact would losing a key person have on your business?
These events can also cause great uncertainty when considering the shareholders within a business. A Shareholders Protection Insurance arrangement can ensure the business is safeguarded. Many companies have articles of association and/or shareholders agreements in place which stipulate what happens in the event of a shareholder passing away or becoming seriously ill, but often no provisions are in place to provide the funds necessary for this arrangement.
This can result in shares falling into the hands of individuals who do not wish to be involved in the business but rightly wish to receive an income whilst still shareholders. Offers to purchase the shares may come from a rival company or from parties who may not have the same vision, commitment or interests as the other shareholders.
Shareholder Protection Insurance is implemented on the life of each shareholder to the value of their shareholding. The policies are placed so that on death, or critical illness, the money can be paid to the remaining shareholders to be used to buy the shares. This enables the surviving shareholders to keep control of the company and the family of the deceased or ill shareholder to receive a fair price for them.
Whether safeguarding your company against the loss of the people that make it tick or ensuring the shares in a business fall into the right hands, business protection can help ensure the future of your business is secured.
If you have any questions about the contents of this article, please click below to submit your enquiry to Griffiths & Armour Client Services Director, Jack Wolstencroft.