New research from Royal London, the UK’s largest mutual life insurer, reveals that only a quarter (26%) of small and medium enterprises (SMEs) have insurance covering key people in their business. Worryingly over half (51%) of senior decision makers in British SMEs who have heard of this type of insurance, don’t think it is important to have a policy. This could be driven by lack of awareness, despite 3 out of 10 (30%) of all SMEs having experienced the loss of a key employee for three months or more due to a serious illness. Of those SMEs aware of each type of cover nearly two-thirds believe it is important to insure their business premises (65%), and 62% their stock and equipment. Yet only 26% actually have a policy to protect a key person. Key person provides a lump sum payment if a key employee suffers a critical illness or dies.
Smaller businesses would face the biggest impact if they lost a key employee, but 57% of businesses with less than 50 employees, who are aware of key person insurance, don’t think it is important. Larger SMEs – with 50 to 249 employees – are more likely to have experienced the loss of a key employee to serious illness or death and nearly half (47%) have taken out a policy.
Over half (51%) of SMEs said that no-one had discussed business protection insurance or recommended that they take out a policy. This shows that there is a need for senior decision makers in British SMEs to speak to a financial adviser to find out whether their business could benefit from the peace of mind that business protection insurance can offer.
Ian Smart, Product Architect at Royal London said: “People are the most valuable asset of any business, but SMEs are more likely to insure their premises and stock than their key people. With a record 5.7 million SMEs in the UK a lot of businesses are leaving their futures exposed to loss of a key employee through serious injury, illness or death.
“Senior decision makers at SMEs need to find out more about business protection insurance from their financial adviser to help insure the future of their businesses.”