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77% of businesses say they have a key employee whose loss would seriously impact the profitability or future survival of the business and yet only 13% of these businesses have protection in place to mitigate this risk
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Over a quarter of UK businesses (27%) choose to protect against the breakdown of office equipment, compared to just 10 % who have protection against the loss of a key member of staff due to their death or critical illness
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Almost a quarter (23%) of business owners have invested their own money into the business in the last 12 months
New research from Scottish Widows has revealed that UK businesses remain worryingly passive when it comes to protecting one of their key assets - their employees. This is despite over three-quarters (77%) admitting that they can identify at least one individual whose loss through death or critical illness would have a serious impact on the profitability or future survival of the business.
The Scottish Widows Business Protection Report, which details research carried out with over 500 UK business decision makers, shows that the majority of businesses are still reluctant to protect themselves from the unexpected happening to a business owner or key member of staff. Just 13% of businesses who have identified the importance of a key person hold insurance that would protect the business against their loss and despite such a low take up of business protection, 60% of businesses admit that they would definitely not survive the loss of a key person.
In fact, it is more likely that UK businesses will insure office equipment, such as the photocopier, against breakdown than they are to insure a key individual whose skill sets are vital to the future survival of the business. The research shows that over a quarter (27%) of businesses have insurance for office equipment in place, compared to just 6% with financial protection if a key person dies and 4% with protection if a key person suffers a critical illness.
A logical conclusion as to why the take up of Business Protection is so low is down to a lack of knowledge and understanding of the benefits - with 38% of businesses not taking out cover as they don't see its' value, 16% saying they hadn't even thought about taking it out and 17% saying they thought it would be too expensive. This highlights the value of sound holistic financial advice which could potentially ensure a better informed and better protected business population.
Unfortunately, despite the majority of businesses openly acknowledging that the loss of a key person would have a severe, if not fatal impact on their future survival, just 29% have actually sought any form of advice on business protection, whether through an Independent financial adviser, their bank or any other resource such as their solicitor, accountant or even family and friends.
In addition, the research highlights that in the last 12 months almost a quarter (27%) of business owners have invested their own money into their business, while a further 13% expect that they will have to do so in the coming year. If people are to put personal assets at risk then it is vital that they take the necessary steps to prevent a damaging impact not just on their business, but potentially their families and personal lives.
Businesses are also worried about the future impact recent and proposed government spending cuts will have on them, with 53% stating these will have a negative impact, despite a pledge by government to provide further support, through competition reform and reducing the regulatory requirements imposed on them.
Iain McGowan, Head of Savings and Protection at Scottish Widows commented:
"There are many reasons for business owners failing to take action. In some cases, this represents a failure to plan properly or a lack of understanding of the benefits of business protection. Perhaps even a refusal to contemplate the death or critical illness of a colleague. However the potential consequences to the business, demonstrate the importance of protecting arguably the one thing that can ensure its future survival; its employees.
Click on the link below to view report
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