Could your business really survive the loss of key personnel?

Over the past six years, Legal & General has conducted three waves of research with owners of different sized businesses at varied stages of development.

The research continues to demonstrate a general lack of awareness of business protection, showing that many businesses have not evaluated the potential risks. As an example, Legal & General’s research shows that 40% of businesses will cease trading in less than 12 months if a key person dies or becomes critically ill.

L&G also found that 89% of businesses that have taken out business protection insurances did so because they were advised to do so by a financial professional. Our Chartered independent financial planning team, Armstrong Watson Financial Planning & Wealth Management, have analysed this research and are concerned that many businesses remain vulnerable. Basically, too few have made adequate arrangements to protect their business against the loss of the people that really matter in the long term.

On our dedicated financial planning website - - we have created a series of blogs to highlight the key findings of the research and outlined some key considerations for business owners.

There are some startling headlines:

  • 61% of business owners said that the diagnosis of a critical illness or death of a business owner/key employee would have the most impact on their business, yet only 43% have taken out insurance to protect against this.
  • Legal & General’s March 2015 research found that 40% of businesses would cease trading in under a year if a key person died or became critically ill, so the impact hasn’t diminished.
  • 51% of businesses have outstanding corporate debt that is unprotected and a staggering 60% of business owners have made no provisions to cover death of a partner/director, in order to help the surviving business owners to purchase the deceased’s share(s).
  • 28% were not aware that a Director’s Loan Account needs to be repaid on death. The liability then falls on the remaining family members or business owners.
  • 84% had borrowing up to £250,000 (the average is £229,000) in their Director’s Loan Account

For more detail on the L&G report and to get our Financial Planning & Wealth Management team’s view on what the numbers mean, read the blog series here.

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