When you own a business, or medical or dental practice, you know the importance of the people who keep it running. How would you cope if your key people fell critically ill or passed away? Business protection could help.
It’s common to insure a business’ physical assets, so it should stand to reason that you should also insure perhaps your most valuable asset – your employees.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
What you’ll need depends on your type of business
Exactly what kind of coverage you need will depend on what type of business you are in. Business protection is available for partnerships (including limited liability partnerships), shareholders, sole traders, and key employees. In the event of death or critical illness of a partner, key person, or sole trader, it can also be used to ensure repayment of a business loan.
The challenges and hardships you might run into as a brand new business will certainly be different from those you’ll face as a successful, well-established business. Depending where you are in your journey might also dictate the kind of coverage you need.
Key Person insurance
While you might not be able to prevent the loss of a key employee, you can protect against it. A key employee could be your practice manager –remember that doctors or dentists will be covered by different insurance.
Key Person insurance compensates a business for any financial loss brought on by the death or critical illness of a key person within the business. To mitigate any major damage, it can provide cash flow to the business to prevent turnover and provide the necessary funds to search for a replacement.
According to Legal & General’s State of the Nation’s SMEs report, 52% of businesses said they would cease trading within the first year after losing a key person. Nearly three-quarters (73%) of businesses who didn’t have coverage were advised to rectify that.
Shareholder and Partnership protection
This kind of protection is an agreement between shareholding directors or partners in a business, supported by life assurance to guarantee that there are enough funds for the survivor to purchase the shares. This ensures that the control of the business is retained by the remaining partners or directors, while also ensuring their beneficiaries get the full value of the deceased’s interest.
If you don’t have a plan to retain ownership of shares upon an event like this, they could pass to someone who doesn’t share the same vision for your business as you do. Or even worse, they could become a majority shareholder and sell the company right from under you.
Nearly half (47%) of business owners have left no instructions in their will or special arrangements regarding shares in their business, according to Legal & General. If they had the funds, 37% of shareholders would buy the owner’s shares.
Why you need to protect your business
Business protection helps to protect a business in case a director, partner, member or key employee suffers a critical illness, becomes unable to work due to a disability or dies unexpectedly.
Key employees are essential no matter what type of business you own. If you lose one or more key members of your staff, it could be extremely detrimental to your bottom line. If you need to replace this person, you’ll lose time and money recruiting and training someone new. It could affect your patient relationships. You could suffer any number of consequences. But with business protection, you’re covered.
Ready to protect your business?
No matter where you are in your business ownership journey, we can help you protect it. Get in touch with us to figure out the right options for you.
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Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.