SMEs Fail to Insure Against Loss of Key Staff
Less than a fifth of small firms have keyman insurance to protect their business against the prolonged absence or death of key employees, new research has revealed.
The survey by insurer Scottish Provident of 250 small-business owners in January this year also found that 57% believe that their business would be significantly affected if a key employee was unable to work for more than six months due to serious illness.
Keyman insurance protects against the loss of a key employee due to serious illness or death, providing a payout to buy time and cover the costs of temporary staff, recruitment, loss of profits or provide a cash injection.
“While small businesses are undoubtedly concerned about losing a key worker to critical illness or death, precious few are safeguarding their company against that eventuality,”
said Scottish Provident national corporate sales manager, Jerry Bayman.
“Our research shows that small-business owners need to improve their knowledge of how to protect their business and their employees.”
Director of Facts and Figures Chartered Financial Planners, Simon Webster, said that keyman insurance is essential for small firms.
“It isn’t widely marketed to small-business owners, and it isn’t a legal requirement, so they tend not to take it out,” he said. “Most employers say that their most important asset is their staff, but they insure their business assets such as plant and machinery, and fail to insure the life of the people who make the business money. For younger employees, keyman insurance could cost as little as £20 a month.”
However, British Insurance Brokers Association technical services manager, Steve Toulsham, said that keyman insurance is not a priority for many small firms on a budget.
“Small businesses will purchase the cover that is a legal requirement first, such as employers’ liability and motor insurance, and then they will look at insuring their business assets. After that, if they have the resources they should look at other insurance such as keyman insurance.
“It’s important for small firms to have business continuity planning in place, to ensure they could carry on trading if there was a disaster such as a flood,” added Toulsham. “If they are very reliant on a particular member of staff, their continuity plan might include buying keyman insurance, but an alternative could be to train other staff so that you retain some of the skills in the event of their absence.”