It’s a slightly worrying fact that a lot of businesses are keen to insure the laser printer sitting in the corner of the office but rather less willing to protect the income generated by a key member of the team.
Perhaps the reality is that a lot of business owners are still in the dark about the benefits of keyman insurance. If so, it’s probably a good time to consider what life would be like without the input of someone that in the cold light of day, you couldn’t actually do without.
One in a million
Some interesting research by Scottish Widows uncovered the fact that 81% of small businesses employing key members of staff had no cover in place for the loss of income or the cost of replacing them. Perhaps more surprising is these figures apply even though four out of five sole traders recognise that they have at least one person on board whose demise would seriously harm the chances of the business surviving.
Does size matter?
As in all businesses, economies of scale have an effect and it’s probably fair to say that the smaller the operation the more at risk it is should a key member of staff be taken out of the picture either through death or serious illness.
That said, Sir Alex Ferguson was part of a huge global brand but nobody could doubt his keyman qualities. And although he retired in good health it would come as no surprise to find out that apart from having a well thought out and orderly succession plan in place, his employers had probably covered the risk of having to activate it earlier than they planned.
Get it right
With the aim of keyman insurance being to provide compensation for any loss incurred through the permanent or temporary loss of a person it follows that the product can be a mixture of life and critical illness insurance. Knowing what’s right and wrong for a particular business however is not always clear cut and getting the right advice is crucial. The other keyman in this case could well be the one you choose to advise you.