Losing someone critical, therefore, could have a crippling effect on an SME's operations and jeopardise its continued existence.
Yet, too often, it's these same indispensable individuals who fail to recognise what could happen to their business if they were to become seriously ill or die.
Warnings about trading without business protection start to hit home
A recent survey of 200 advisers, conducted by the insurer VitalityLife, suggests that more business leaders are waking up to this major risk. According to VitalityLife's research, 24% of respondents said that they'd seen an increase in demand for business protection among their corporate clients over the last five years.
Business protection advisers believe that more awareness of the issue is driving demand, together with an increase in the number of SMEs and the self-employed in the UK.
However, while this survey may show that there's a growing interest in business protection, the fact is that most SMEs remain oblivious to the potential risks they face without it.
Legal & General's most recent report on business protection found that only 41% of SMEs in the UK had life cover in place for employees in critical roles. The report also found that 53% of businesses would go under in less than a year if they were to lose a key member of staff.
Keyman insurance could keep your business afloat
As the name implies, 'keyman' or 'key person' insurance provides cover against the serious illness or death of a person vital to the running of a business. If that person falls ill or dies, then the insurance settlement will be paid directly to the company.
These funds can then be used to mitigate any ensuing financial difficulties or pay for recruiting a replacement for the absent or deceased employee.
A key person hospitalised by critical illness, too, may recover and return to work. In these circumstances, the insurance payout could fund their temporary replacement or make up for any loss of revenue the business bears as a result of their absence.
For more information on keyman insurance, contact our employee benefits specialist, Nick Skipper.
