Business Protection Revisited
For all business owners when it comes to protecting the business the key considerations are continuity and succession.
On the temporary absence or loss of a key person business owners need to consider for how long (if at all) the business could continue to run efficiently and remain profitable. In addition to this they need to consider what plans are in place to ensure business assets are valued correctly and passed to the right people.
Businesses look to protect themselves against every eventuality, buying cover for their buildings, contents, materials and cars. However, the majority don’t cover their single biggest asset – their employees. According to research carried out by the British Chambers of Commerce in 2009, more than 60% of businesses have at least two key individuals. However, 44% of those surveyed said their businesses wouldn’t survive longer than 12 months if they lost one of these key people.
We touched on this subject in our blog last month and it is a subject we plan to revisit regularly as there continues to be a staggering need for companies to address this issue.
We’ve all heard at one time or other someone quote those famous worlds from Benjamin Franklin “In this world nothing can be said to be certain, except death and taxes”. Ask any business owner what concerns them when it comes to tax and they will most certainly respond that they want to ensure they maximise all available tax advantages and to have the correct accounting procedures in place to do so.
Why then do so many companies remain resistant when it comes to having the correct plans and procedures in place to ensure death or serious illness does not affect the daily running of the business?
Consider the likelihood of at least one partner/director in a firm dying before age 65*
| Age | Number of Partners/Directors | |||||
| 1 | 2 | 3 | 4 | 5 | 10 | |
| 35 | 7% | 13% | 19% | 25% | 30% | 51% |
| 40 | 7% | 13% | 18% | 24% | 29% | 49% |
| 45 | 6% | 12% | 17% | 23% | 27% | 47% |
| 50 | 6% | 11% | 16% | 21% | 25% | 44% |
Further to that consider the likelihood of at least one partner/director in a firm having a critical illness before age 65**
| Age | Number of Partners/Directors | |||||
| 1 | 2 | 3 | 4 | 5 | 10 | |
| 35 | 29% | 50% | 65% | 75% | 82% | 97% |
| 40 | 29% | 49% | 64% | 74% | 81% | 97% |
| 45 | 27% | 47% | 62% | 72% | 80% | 96% |
| 50 | 25% | 44% | 58% | 68% | 76% | 94% |
Are the percentages as you expected?
Whether you are a Limited Company, Sole Trader, Partnership or Limited Liability Partnership the threat of death or serious illness of a key person is very real and it doesn’t have to mean the end of a business you have worked hard to create and make profitable.
If you are considering (or know someone who should be considering) continuity or succession planning we can help with calculating the level of cover required, how to set up the arrangement and the tax implications associated with the premiums and benefits payable on these plans.
We have dedicated teams with 5 of the top Business Protection Providers who can help us help you put the right plans in place, allowing you to get on with making your business profitable without the worry of what happens if someone takes seriously ill or dies.
It isn’t as complex or as expensive as you might think, so don’t delay, get in touch with us today and let the Expert Team at Oliver Asset Management ensure your business goes from strength to strength safe in the knowledge your protection needs have been met and will be reviewed regularly.
We look forward to hearing from you.
Dr Claire Armstrong
Source: www.actuaries.org.uk/knowledge/cmi/cmi_tables
*Based on mortality data from TMN00 (temporary assured lives, male non-smokers, 1999-2002) at five or more years’ duration.
**CIBT02. Based on 1971-2003 population data and experience, published in SIAS paper Exploring The Critical Path, 2006. Males, stand-alone extended cover, including own occupation and total and permanent disability.