Most businesses unprepared for the death of a key person

So you would think businesses would be prepared and have protection in place to help them deal with this kind of tragic event – particularly when it comes to financial help and insurance.

More than half of businesses in the UK believe they would cease trading in less than a year as a result of the death of an owner or key person – according to research by Legal & General.

This is particularly true for smaller or newer businesses when success is dependent on a lower number of people.

But, the research suggests otherwise.

Shareholder businesses running a risk

According to the research from L&G, more than half of shareholders don’t even have a plan or instructions left in their Will for what will happen regarding the shares in their business in a result of their death.

Most shareholders say they’ve never even thought about it.

Just over a quarter (26%) say they fund the purchase of shares using their personal wealth.

But is that really practical?

As a shareholder, would you really have the personal wealth that could fund the purchase of shares, without putting your financial stability at risk?

For those who wouldn’t fund the purchase of shares, more than one in five (21%) say they have resigned themselves to having the beneficiaries of an outgoing shareholder’s shares becoming involved in the business.

And this is regardless of whether that person has any business experience or knowledge of what the business actually does.

Why you need to be prepared for the death of a shareholder of key person

Nobody really wants to think about the death of a shareholder or key person, but the reality is it’s something a responsible business owner needs to consider.

When it does happen, having the correct continuity plans and the right level of business insurance is critical.

Unfortunately, the research suggests not enough businesses are prepared and are putting themselves and their financial future at risk.

Shareholder protection insurance is just one way a business can keep itself protected.

It provides financial support for businesses to fund the purchase of any outgoing shares without risking the business’ financial position.

Without putting the proper measures in place, businesses are putting themselves at risk, and – according to research – too many are putting themselves in this risky position.