Keyman Insurance - Protect Yourself
Against Your Biggest Businesses Risks
As a
businessman you might have public liability insurance and you insure your
buildings, stock and vehicles. You may even have professional indemnity
insurance and legal cost insurance. Is that all? What about your other primary
assets - your key staff?
Key
staff represent the heart of every businesses but no more so than the UK's 3.9
million small, often family, businesses that have up to 4 employees. Prolonged
absence through serious illness or even death can be terminal for some of these
enterprises. The risks are the same for limited companies, a partnerships and
sole traders.
In this
context Keyman Insurance is a must. Keyman Insurance represents a group of
insurance plans all designed to financially protect business from the affects
of prolonged illness or even death of staff who are central to the prosperity
of the business. The insurance can't replace people but it can provide cash to
buy time and cover the costs of temporary staff, recruitment, loss of profits
or provide a cash injection.
The
insurance falls into four categories - insurance to help your business recover
during the extended period when your key personnel are unable to work or to
train or recruit a replacement, insurance to protect profits, insurance to
protect shareholders or partnership interests, and insurance for anyone
involved in guaranteeing businesses loans or banking facilities.
Keyman
Insurance on those who are central to your business.
Who are
your key people? They are the ones who steer, create and drive your business.
The people without whom your business would lose sales and profits or without
whom even the basic viability of your business would be shaken. Look at the
Directors, Partners, owners and beyond. Consider the roles of senior managers
in sales, technical development and operations - the roles will change in every
business but the candidates are sure to jump out at you.
Insuring
these people will provide the extra cash needed to take on temporary staff or
recruit and train a replacement.
Keyman
Insurance to protect your Profits.
The
effect of losing key staff goes well beyond simply the cost of their salaries
and the cost of replacement. As they're central to the businesses prosperity,
their loss will knock on to the bottom line. You can insure for loss of profits
too!
Keyman
Insurance to protect Shareholders or Partners.
Here we
are talking about insurance to protect interests in the event of long-term
illness or death. Families may want to sell their stake in the business but the
remaining members in the business may not want those stakes held by newcomers.
Keyman insurance schemes can be implemented which provide the necessary finance
to buy the shares from the original shareholders or their estate.
Keyman
Insurance insuring those who provide personal guarantees.
When a
business takes out a loan or raises bank finance the lender is quite likely to
require a personal guarantee or a charge on their personal property. This
especially applies to small and new businesses. So what happens if these
guarantors become seriously ill or die? The lenders may well be in a position
to call in the loan. What happens then? Again, Keyman Insurance is the answer.
Insurance can be structured to pay-off the loan and thus free the business and
the guarantor's family, from major worry.
Most of
the UK's leading insurance companies offer Keyman Insurance as a development of
their Life and Critical Illness Insurance interests. They have all the
necessary paperwork available to implement the cover you need and ensure the
taxman is kept at bay.
So, can
your business afford to ignore Keyman Insurance? You'll be either a brave or
foolish man to say NO!
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Description:
keyman insurance - protect yourself against your biggest businesses risks as a
businessman you might have public liability insurance and you insure
Memo to Myself - I Need Keyman
Insurance
Last
month I had to drive down to London. I don't like driving at the best of times
but the rain, spray and heavy traffic on the M1 made conditions difficult.
Radio 2 kept me company and the heater kept me warm. Then I hit that queue -
six miles solid and I was soon an hour behind schedule.
They
were still clearing up the accident when I got there. It was nasty. A lorry and
what was left of two cars. Made me think, after all that could have been me.
Yep, my life insurance is up to date and my Will was renewed only last month.
The family would be well cared for and the mortgage repaid. Had I missed
anything?
The
business. What would happen to that? We have two directors, 7 employees, an
overdraft and lots of insurance. Public Liability, professional indemnity,
vehicles and stock are all insured. We even have legal protection insurance.
Had I missed anything? I got to thinking.
Thank
goodness it wasn't George in that accident. A great guy and he's been with us
five years. He's our top salesman. There again what if it had been my
co-director who also owns 50% of the business? What would be the repercussions
on the business?
Sales
down, profits down, bank phoning all too politely to ask about the Directors
guarantee on the overdraft. Then I'd have to try and buy his shares. I wouldn't
want someone else to get hold of those. At some stage I'd have to recruit
someone of his calibre to continue the company going forward - that wouldn't be
easy! And recruiting top people doesn't come cheap. That's more time and more
money. The personal problems... the repercussions... the extra work... the
extra stress...
Oh heck,
I don't want to think about it all. Quickly, switch over to Radio 1.
Does all
this ring alarm bells with you? 95.2% of UK businesses employ less than 10
people and these are precisely the organisations most at risk from the impact
of severe illness or death of a key person. The risks of a key person being
stuck down with a long term illness or death are real. 1 in 5 men suffer a
critical illness before their normal retirement age. Then there's the M1. The
fact that it hasn't happened so far might just mean your business has just been
lucky.
Now to
those actuarial boffins in insurance companies, risk and luck are flip sides of
the same coin. And they can provide insurance cover for most risks. After all
they too want to increase sales. But they're scratching their heads about
Keyman Insurance. Most of Britain's 4.1million small businesses should have it
but few do. What can it do? It can be structured to:
Provide
an income stream to the company whilst the key person is incapacitated
(compensation for the lost contribution from the Keyman)
Provide
a lump sum to the business in the event of death (pay off the overdraft or
simply bolster cash flow?)
Provide
money for remaining shareholders to buy the shares from the original
shareholder or their estate
You'll
need to talk to a Financial Adviser about these issues but they are all
insurable. Can your business afford to take a risk it doesn't need to?
Memo to
myself - get Keyman Insurance!
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Description:
memo to myself - i need keyman insurance last month i had to drive down to
london. i don't like driving at the best of times but the rain, spray and
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