Business Protection in the Real World

Key Facts about Business Protection Insurance:

Business Protection refers to single or multiple insurance contracts which provide funds to help protect a business from the financial impact of illness or death of a Key Person or Owner.
Business protection is available for Partnerships, Shareholders, sole traders and key employees.
How the arrangement is set up will depend upon the type of business and its particular needs. It is crucial to seek specialist advice.

The importance of Business Protection is often overlooked. It can be vital to help businesses plan for the unexpected, providing funds to ensure that the business can continue with minimal financial disruption following the loss of a key employee or one of the owners through death, serious illness or temporary disablement.

Please refer to our Business Protection link for details of the different types of cover.

The Case Study

Understanding risk is a fundamental part of business. Businesses work hard to minimise, monitor and control the impact of risk and the probability of those risks occurring. However if unforeseen death or serious illness strikes, the financial impact can be catastrophic. Nobody expects this to happen, but with careful planning and specialist advice, when times are really difficult at least financial protection need not be a concern.

The following case is a real life example and is based on actual events-only confidential information has been changed to protect anonymity.

The Partners

In 2015 Pete, Simon and Martin bought into their company as part of a Management Buy Out. Here is their story;

Simon (29) was single and owned his own property.
Martin (30) was married with a young daughter and living with his parents in law.
Pete (31) was single and living with a long term partner who was expecting their first child.
A partnership had been created to facilitate borrowing to fund the purchase

They requested our advice regarding Business Protection.

The Protection Strategy

After detailed discussions and careful consideration of the needs of the company and the individuals concerned, the following policies were put in place for each individual:

Shareholder Protection: The company took out 3 separate Shareholder Protection policies, on the life of Peter, Simon and Martin. Sum assured £50,000 alongside a Cross Option Agreement. The policies provided cover in the event of death or critical Illness. The average monthly premiums was £18.
Partnership Key Person protection: Each partner also secured £100,000 of Partnership Key Person Protection, covering both life and critical illness. The average monthly premium was £32.
Business loan protection: They arranged £150,000 of Business Loan Protection per partner, which also covered both life and critical illness. The average monthly premium was £37.

The Crisis

Without warning just over 12m later, Pete had a stroke. This led to the following;

The company wanted to buy back his shares
He was unable to continue in his current position/responsibilities
There was pressure meeting the significant monthly repayments on the borrowing

The Outcome

We supported Pete and his colleagues to complete a claim against all three policies;

Shareholder Protection paid £50,000 back to the company. This was used to purchase Pete’s shares from him.
Partnership protection paid £100,000 to the partners. They passed this on to Pete to support him and his family.
Business Loan protection paid £150,000 to the partners which was used to repay the borrowing in full. This saved each partner over £800pm repayments.

The claims proceeds from the above policies protected the company, Pete and his family and also the other partners from the financial impact of his stroke. This meant that both Pete and the company could focus on recovery.

You’ve probably spent years building and investing in your business-don’t leave your plans to chance-protect them.

Why choose Grosvenor Insurance for your Business Protection

Obtaining the right protection policy for yourself or your business requires specialist advice. We have decades of experience in working with individuals and businesses, identifying and prioritising financial risk and delivering tailored solutions to provide financial protection when it matters-giving you the support, financial security and confidence to begin your recovery. Contact us through our website or call 01244 324891.