According to recent research from Royal London, most small businesses are failing to insure their key employees. CHW Bolton Accountants explains further and highlights the potential importance of ‘key person’ insurance for SMEs.
If a key person in a business dies or becomes critically ill the loss can have a severe impact and a devastating financial effect. The business could suffer badly, with sales and profits falling and increased workloads for the remaining staff.
Key Person Protection is designed to pay out a lump sum to help the company survive the blow of losing that person who had been instrumental in making the business work.
The lump sum can then be used to help replace lost profit or finding and hiring a replacement.
According to the research, whilst 3 in 10 SMEs have experienced the loss of a key employee for 3 months or more due to a serious illness or death, only 26% have this type of cover and 51% don’t view it as important.
People are the most valuable asset of any business, but SMEs are more likely to insure their premises and stock than their key people.
The loss of a key person in a small business has been known to cause the immediate death of that company and senior decision-makers at SMEs should seriously consider whether this type of cover is required to protect the future of their business.
For advice on this or any other issue relating to your accounts, contact at CHW Bolton Accountants on 01204 534031 or via our contact us page.
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