Coronavirus has created many challenges for businesses and an area of discussion that has rapidly escalated in importance is around protection. Protection should always be an area of priority for a business, but the situation we find ourselves in has understandably brought this topic to the fore.
When reviewing continuity and succession plans, you need to consider:
- How would your business cope with the death of a key person that has a direct influence on the profitability of the company?
- What would happen to the business should a director, shareholder or owner pass away?
Key Person’s Protection
53 percent of businesses cease trading in under a year after the loss of a key person. Why? Often the effect the deceased individual had on turnover or profit was so great, that the business can no longer continue without them. There could also be litigation, brand damage and liquidation issues to contend with which can ultimately lead to business failure.
So what can a wealth planner do to help? They can help you:
- identify: key people in your business,
- quantify the financial risks of an individual passing away
- create a solution and implement it.
The typical result here is a life assurance plan, where the business receives the sum assured on a specific individual passing away.
Another area of great importance is relevant life cover. This is a tax efficient policy that allows an employer to offer a death in service benefit to their employees. Life cover policies are applicable to small businesses who do not have the scale to qualify for group schemes. This offering helps businesses offer competitive employee packages to attract and retain the right employee...