Most small businesses are run by owners who put in a great deal of time and money trying to make or keep the business profitable. Over 95% of businesses in the UK are categorised as small or medium businesses with the average number of employess being less than ten.

With such a small workforce, inevitably there will be one or two persons who play a key role in the running of the enterprise. Losing these persons would usually be disastrous for the business, especially small shopkeepers or sole traders running on a shoe-string budget.

Rather surprisingly, only about 15% of these businesses have key person insurance! Key person (or keyman) insurance is absolutely essential for small businesses to protect against the loss of key “revenue earning” personnel, without whom the business would be in the doldrums! The situation becomes even more serious if that key person is a director/partner of the business and is standing guarantee for repayment of bank loans borrowed by the firm.

Keyman insurance provides you with an income for the duration that the key person is incapacitated or, in the event of his/her death, a lump sum of money. If the key person was a partner/shareholder, the other partners/shareholders would have the money to buy out the key person or their estate.

In the case of family-owned businesses, while having personal life insurance is good, the owner should  consider separate keyperson insurance so that the business would have the time and resources to recruit and train new personnel to run the business rather than letting the business collapse due to the death or incapacitation of the key person.
If your business does not have keyman insurance, you need to reconsider your options. Will your business survive the loss of key personnel? It is better to have protection in place rather than worrying about what to do to keep your firm afloat after the loss of your key personnel.