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It won't happen to SME...will it?

06 October 2014

Many smaller businesses are gambling their future by having no insurance against sickness or death of key staff.

Looking at the evidence, you could be forgiven for assuming that business owners never fall seriously ill or die.

Most companies make sure they have public liability insurance and cover for contents, fire and theft.  And one would expect anyone running a small to medium sized enterprise (SME) to recognise that the serious illness or death of a key person would have a potentially devastating effect on the business, not least to its value and profitability.

Key Person Insurance

Key Person Insurance, also known as Key Man Insurance, compensates companies for losses incurred due to the extended absence of an important member of the workforce.

As well as covering the loss of profits suffered by the business until a replacement is found, Key Person Insurance can also pay for the costs of recruitment and training of a replacement.

Many adopting a high risk strategy

Yet almost two thirds (65%) have no protection insurance for their owners and key employees according to Zurich’s SME Risk Index - a quarterly survey measuring the perceived level of business risk faced by SMEs. This is somewhat surprising when you consider 45% of those surveyed highlighted the death or critical illness of key employees as a major risk.

Clearly, when it comes to key people, many SMEs are adopting a high risk strategy by doing absolutely nothing about cover at all. Without question, the consequences of such inaction are potentially dire.

Serious illness not uncommon

Given that serious illness, such as cancer or a heart attack, affects one in four women and one in five men before retirement age*, potential scenarios like these are not uncommon.  Yet the problems facing SMEs can be mitigated if right safeguards such as key person insurance are in place. 

Seek specialist help

Having the correct protection and ensuring this is regularly reviewed and updated to reflect business changes is a particularly onerous and daunting task for time-hungry entrepreneurs.  It is one which is best left to a wealth management specialist to help protect the business from a wide range of risks and ensure business owners meet their aims while concentrating on managing their company.

* Source:, September 2014

Some of the products and investment structures documented within this article will not be available to our clients in Asia. For information on the funds that are available please get in touch.


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