Business protection is the key

By Mattioli Woods

21 Mar 2013

Protecting your business against the loss of any key person can be daunting. Where to start? Who is classed as a key person? What would the impact be to the business? What are the differing terms of policies? Keith Pressler from Taylor Patterson advises.

Protection can help the business from any financial fallout of any key person dying, falling terminally ill or, provided critical illness cover has been taken as an optional extra, falling critically ill during the term of the plan.

Whether they provide knowledge, key contacts or other assets such as funding, losing a key person can be detrimental to any organisation. The business could be hit by a reduction in sales resulting in loss of profit, not to mention the potential recruitment and training costs that could be incurred to hire a replacement, these are just a few of the pitfalls that need to be considered.

So what types of business protection exist?

Key person InsuranceSometimes the hardest question to ask is who is identified as a ‘key person? Common examples include, managing director, finance director, sales director, technology specialists or other staff with specialist skills.

Knowledge and relationships are fundamental to the running of any business and if someone with this level of skill passes away the economic impact can be devastating. Having a plan in place for this can be the key to survival for a business. If anything unfortunate were to happen the insurance policy pays out a lump sum to financially recompense the business and stabilise it in a period of uncertainty.

Depending on the level of cover, individuals may need to review internal policies such as travel in order to reduce levels of risk. For example, if 5 key personnel are all travelling together and something unfortunate happens, the level of risk is quite high, certain plans may request the risk is mitigated by only 2 members of staff travelling together in certain circumstances,

However, it’s interesting to note that not all key people will be shareholders within a business, so how can shareholders be protected?

Shareholder protectionAlthough shareholders may not possess a specialist skill, they do hold an influence in the direction of a business. If a shareholder were to pass away, the remaining shareholders may not want the shares passing to a non business related person such as family relatives with little or no understanding of the business.

In cases like this the insurance policy ensures the shares revert back to the business, with the spouse/partner getting the cash lump sum of the value of the shares. Legal advice is necessary to draw up a shareholder agreement in these circumstances so organisations have the option of how those shares will be divided upon death.

Whatever policy is put into place it is worth reviewing annually. Not only do insurance policies and terms change, rates can go up and down dependent on market conditions. Just as policies can change, the value of the business will also vary so policies might not be up to date with current value. If key personnel have received training over the time period, their knowledge and expertise might mean the business needs more financial compensation upon unfortunate events.

Latest news

1

PM urged not to retaliate over tariffs Manufacturing

PM urged not to retaliate over tariffs

03 Apr 2025

2

CMAC Group appoints Matthew Ratcliffe as chief operating officer Matthew Ratcliffe CMAC

CMAC Group appoints Matthew Ratcliffe as chief operating officer

03 Apr 2025

3

For sale signs at The Villa Villa Wrea Green has been brought to market (Image credit: The Villa Wrea Green)

For sale signs at The Villa

02 Apr 2025

4

Montane group expands with new Lancashire hub Anthony Rae Scott Murcott And Adam Lee

Montane group expands with new Lancashire hub

02 Apr 2025

5

Trio of wins for Lancaster brand and digital consultancy Tom Grattan MD and Daniel Wallace

Trio of wins for Lancaster brand and digital consultancy

02 Apr 2025

Pc Prestonmacan Gif980x120 March
Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
Lancashire Net Zero Carbon Conference
Net Zero Carbon Social 1200px
Networking
18 Jun 2025

Lancashire Net Zero Carbon Conference

Crow Wood Hotel & Spa Resort, Burnley, BB12 0RT

08:30 - 13:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

RISE - The Academy for Female Leaders and Managers
WENDY BOWERS RISE Illustrstion copy.jpg.jpg
LBV Hub Seminars
02 Apr 2025 - 08 Oct 2025

RISE - The Academy for Female Leaders and Managers

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:00 - 15:30

Lancashire Business Expo 2025
https---cdn.evbuc.com-images-880395853-4862066883-1-original.20241022-091152-2.jpeg.jpg
LBV Hub Exhibitions
04 Apr 2025 - 04 Apr 2025

Lancashire Business Expo 2025

Sir Tom Finney Sports Centre, Preston, PR1 2HE

09:00 - 15:00

The Business Network Central & East Lancashire
LBV Hub Networking
24 Apr 2025 - 24 Apr 2025

The Business Network Central & East Lancashire

Stanley House, Blackburn, BB2 7NP

11:30 - 14:15

People Power: Exclusive Event Series
Stay ahead in 2025.jpg.jpg
LBV Hub Seminars
29 Apr 2025 - 29 Apr 2025

People Power: Exclusive Event Series

People's History Museum, Manchester, M3 3ER

17:00 - 21:00

Planning for the future + navigating Inheritance Tax changes
Planning for the future + navigating Inheritance Tax changes for website.png.png
LBV Hub Seminars
01 May 2025 - 01 May 2025

Planning for the future + navigating Inheritance Tax changes

Stanley House Hotel, Mellor, Blackburn, BB2 7NP, Blackburn, BB2 7NP

08:00 - 10:30

A night at the races
1.png.png
LBV Hub Dinners / Balls
02 May 2025 - 02 May 2025

A night at the races

Morecambe FC, Morecambe, LA4 4TB

19:00 - 23:59

Amber River True Bearing quarterly investment seminar
LBV Hub Seminars
22 May 2025 - 22 May 2025

Amber River True Bearing quarterly investment seminar

Cottons Hotel & Spa , Knutsford, WA16 0SU

16:00 - 18:00

Liverpool Business Expo 2025
https---cdn.evbuc.com-images-881365363-4862066883-1-original.20241023-085714.jpeg.jpg
LBV Hub Awards
23 May 2025 - 23 May 2025

Liverpool Business Expo 2025

Aintree Racecourse , Liverpool , L9 5AS

09:00 - 15:00

National Centre for Remote and Rural Medicine Conference 2025
Remote and Rural 3.jpg.jpg
LBV Hub Awards
05 Jun 2025 - 05 Jun 2025

National Centre for Remote and Rural Medicine Conference 2025

North Lakes Hotel and Spa, Penrith, CA11 8QT

09:30 - 17:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more Lbv121 Online Graphic
Subscribe now

Weekly news bulletin