It is not only individuals who need protection; SMEs are vulnerable, too. Steve Casey outlines a lucrative source of business.
The Queen's Speech in May highlighted the introduction of the Small Business, Enterprise and Employment Bill: the first significant piece of legislation drafted specifically to help small businesses, reduce pressures on cash flow and improve their access to finance.
If the legislation delivers these aims, it will be a huge improvement to the operating environment for small businesses across the UK. But even so, owners of small businesses will still have a number of major issues around access to finance to consider. Financial protection is one of them.
Most businesses buy insurance to cover the things they consider vital to business continuity, such as buildings, stock and equipment. But in reality it is widely recognised that their most vital asset is their people: the loss of an owner or key person can lead to a prolonged period of reduced income and even threaten to change the ownership of a business.
It therefore makes sense to check that your business clients have the correct financial protection in place and ensure any cover they have not only looks after stock and equipment, but extends to their key employees.
There are a wide range of business protection products out there, and most providers will offer flexible underwriting, online capability and technical support, as well as a range of support materials to help you understand how you can help secure the financial future of your clients' companies if something happens to one of their key personnel.
According to the Department for Business Innovation & Skills, there were 4.9 million private-sector businesses in the UK at the start of 2013, employing an estimated 24.3 million people with a combined annual turnover of £3.3bn. So there is certainly a market to tap into.
Personal versus business
Personal protection provides for the financial needs of the family if the insured person falls ill or dies, whereas business protection provides for the financial needs of a business if one of the insured owners or key employees dies, suffers a terminal illness or is diagnosed with a critical illness.
In these cases, a claim can provide the cash to cover loss of earnings, repay a loan or buy out a co-owner, helping the business to survive, continue trading and ensure they have the funds to make sure the business stays in their hands.
Compared with personal protection, business cases often take higher sums assured and multiple policies. Plus, as many intermediaries will point out, meetings are usually held during business hours.
One initial meeting could be the start of a long-running relationship, and active intermediaries in business protection often say that they receive referrals from the nominated trustees of the plans.
You need to ask business owners what would happen to their business if they or a business partner died or were seriously ill. For example, what would happen if profits are heavily reliant on one person, illness meant they wanted to sell quickly, or were responsible for a loan? Business protection can help manage people risk, facilitate business continuity and aid succession planning.
Protection options
The policies have been available for quite a while, but business protection opportunities don't end here. Relevant life insurance is another type of business policy that enables small companies to provide life insurance as an employee benefit - much like larger companies do through group schemes - and benefit from similar tax relief advantages.
