The knowledge gap that could leave up to 40% of Britain’s businesses in jeopardy

Research conducted by Legal and General reveals that up to  40% of businesses would cease trading within a year if a key person died or became critically ill, yet only a fraction of those businesses have taken precautions to protect themselves from such events.

Although many business owners arrange insurances to cover items such as buildings and contents, machinery, vehicles, stock and cars, many don’t consider insuring what is usually their greatest asset - the proprietors and staff.

In addition to this, 57% of businesses state that they have outstanding corporate debt, but many still have no cover in place to repay it upon loss of a key person.

Andrew Kilby, Managing Director of Armstrong Watson Financial Planning comments:

‘The Legal and General research highlights some real concerns and in our experience this is primarily due to a gap in the knowledge of business owners as to what can be protected, rather than their desire to overlook the problem entirely.’

The research raises some questions:

Why do over half of businesses have no insurance arrangements in place to protect against the loss of a key person?

What would happen to the business if this occurred, how significant would the impact be and could the business even continue to trade?

How will the 57% of businesses with outstanding corporate debt cope if their bank demands repayment of the loan if a key member of staff or one of the business owners dies?

Director’s loan accounts also need to be repaid on death, but the research indicates that 28% of directors were not aware of this, so in many cases where would the required cash come from at such a difficult time? Will the deceased’s spouse/partner take their place, or would they look to sell to a potential third party? Perhaps most importantly, how will the surviving owners raise the capital to buy out their share?

The answers to these questions will vary of course, depending on the business itself and its circumstances, but should the worst happen the potential pitfalls can be significant, and in many cases this could threaten the survival of the business as a whole.

Ensuring the future of a business in these different situations should be an integral area of planning for business owners and this is where professional advice is essential to make sure that the right protection is put in place.

Speak to one of our Financial Planning Consultants to find out how to properly protect your business, or visit our dedicated Financial Planning & Wealth Management website at

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