Key Person / Business Protection

There are four main types of business protection: keyperson cover, shareholder or partnership protection, sole trader business protection and business loan protection.
The starting point for keyperson cover is to identify anyone in the business who has a direct effect on turnover or profit. That can be someone responsible for selling or whose contacts help sales, or a person who plays a pivotal role in a major project.  More typically here on the Island a business owner with key skills

Solutions depend on the role of the key person but will likely involve life protection, critical-illness cover and/or income protection.

One of the big problems small businesses face is what happens when one of the main shareholders either dies or becomes critically ill. The same situation also arises with partnerships.

Another member of that person’s family often takes over their stake in the business. However, if they have little knowledge or interest in the business, this can be a stumbling block for future development or even for just keeping the business going. In a worst case scenario, they may sell out to a competitor or simply force the business to be wound up so they can get their money back.

By ensuring the business receives a cash sum if a main shareholder or partner becomes seriously ill or dies, you ensure the business has the money to buy out whoever has inherited.

Of course, it is important this protection is arranged under an appropriate trust and with a suitable cross option agreement to determine exactly what does happen in such circumstances. This will need reviewing on a regular basis.

Care must to be taken because partners, directors or shareholders are likely to be of various ages and the costs of funding the policies have to be arranged so that each contributes in proportion to what they are likely to receive as benefit. This is known as premium equalisation.

It is vital that commerciality is maintained. Sole traders are even more vulnerable. They do not have the usual employment securities such as sick pay or death-in-service benefits, which means the business is likely to collapse with a major financial effect on them or their families.

Business loan protection is probably the best known and most utilised element of business protection because it is often a condition or recommendation of the loan in the first place. It provides a lump sum so the business loan can be repaid should a key person - such as the owner or one of the directors - contract a critical illness or die.

The role of MAC to source the most appropriate cover that offers excellent value for money cannot be underestimated.   We will also guide you through some of the Legal and Trust requirements that are often required.

Clients want value for money . Value is more than just the price. Financial strength, claim-paying history and factors such as the ability to process a large sum-assured case efficiently, medical underwriting capability, financial underwriting limits, product flexibility and future options should also play an important part. Although underwriting requirements vary from provider to provider, they often mean the need for GP reports and medical evidence requests for the larger sums assured under business protection. This can be seen by some clients as too much of a hurdle. Which is where MAC can help through some of its exclusive deals it has negotiated on the Island, eg High "free cover limits " i.e. a sum assured within a group scheme that can mean most people , irrespective of the medical conditions, can get insured immediately.

If you , your partner and your business is important to you take some time to talk to MAC about how we can help.