A recent International Monetary Fund (IMF) forecast, as reported by the BBC, suggests that the UK will be the only major world economy to shrink in 2023.
Our slow Covid recovery, exacerbated by Russia’s invasion of Ukraine, has led to a cost of living crisis. High inflation, rising energy bills, and an increased cost of borrowing look set to remain in place for at least the first half of 2023.
And while Anglo-Dutch company Shell posted profits of £32.2 billion last year, times will likely be tougher for your small or medium-sized enterprise (SME).
Running a business in the current economic climate might not be easy but take a moment to imagine how much harder it would be if you fell ill.
As you are forced to make some difficult decisions this year, be sure that one of them is to check in with your business protection.
Protection can help to keep your business running
Like all forms of insurance, business protection is about looking after your future self. This can be a hard sell when times are tough in the present. Currently, you might be concentrating on:
And yet all of these problems only exist as long as you have a functional business to run.
Falling ill, or losing a key colleague to sudden illness, or even death, could leave you without the knowledge and expertise, or the money, to keep your business running. At the least, a sudden emergency could jeopardise the continuity of your business operations.
Dealing with an accident or illness can be emotional and stressful but having key protections in place will give you and your loved ones financial peace of mind. You’ll also have confidence that your business can continue to run smoothly, without affecting your clients.
Key person protection could help cover lost profits and the cost to train new employees
In a small business, it is usual to have key personnel with particular specialisms. This might be an area of knowledge or a bank of specific clients. Losing any of these key members could leave the company exposed.
You’ll need to recruit a replacement with the same level of expertise or train a current staff member, probably quite quickly.
Where a colleague had clients that they dealt with personally, the business may lose some of these clients in the absence of their favoured contact.
A payout in the event of death could be used for the cost of advertising new positions, training existing staff, or covering lost profits while new clients are found. This can help your business to keep running effectively during a period of transition.
Some plans include critical illness cover too, especially useful if you are a sole trader, ensuring continued income at a time when you are unable to work.
Business loan protection can cover company debt and personal company investment
Your company likely has some form of debt. If the death of a colleague would make it difficult to keep up repayments – on a commercial mortgage, business loan, or overdraft, say – business loan protection could help.
Use loan protection to cover the cost of the debt, making sure the debt is repayable whatever the future holds.
If you have invested your own money into the company, you’ll want to be sure this is covered too. Where the business has more than one director, you might use a Directors’ Loan account to safeguard your investment.
Directors’ loans must be repaid in the event of the director’s death so life insurance here is crucial.
Share protection provides the money to buy back a deceased partner’s shares
A share protection arrangement allows each shareholder to take out a life insurance policy covering the value of the shares they hold.
In the event of death, the policy pays out and the remaining shareholders have the funds to buy back those shares.
This allows the surviving shareholders to retain full control, preventing shareholdings from passing to someone outside of the business – a deceased colleague’s family, for example.
While this might not always be the preferred option, it is worth considering who you want to be able to have a say in your business and how it is run.
Get in touch
2023 looks set to be a tough year for the economy. It is worth noting, though, that the IMF did state that the UK was now “on the right track”.
Riding out present uncertainty and protecting yourself against future shocks is the best way to safeguard your business and provide peace of mind to you, your fellow directors and shareholders, and your loved ones.
If you would like to discuss business protection, or you have questions on any other aspects of your long-term financial plans, please contact us today.
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