Gap in Life Insurance market makes UK firms vulnerable

To ascertain how prepared British business is in terms of insurance for  its corporate debt, planning for its future by dealing with the loss or illness of a business owner or key individual, Legal & General recently commissioned a survey, reports review site Life Insurance Compare, through The British Chamber of Commerce to understand UK firms’ current protection levels and how large the gap might be.

For instance, the survey revealed that few businesses are prepared for the loss of a business owner or a key individual.  A quite staggering 44% revealed their business would be unlikely to survive a year were they to lose such a person.  30% of those surveyed actually said the business would probably cease to trade within three months, while 47% only expected to last two years.  This threat is heightened by the fact that most businesses (64%) only have, at most, two key individuals – losing one is likely to increase the overall impact and could have a profound effect on the ability of the firm to continue trading.

While only a small number of businesses had experienced the death of a business owner – just 7% – the impact of such an event could be significant.  Over 10% of those who had been through the experience said their firm had seen a loss in profits, more than 25% said that family had become involved in the running of the business; in the case of a business owner undergoing a critical illness, 36% had seen a loss in profits from the owner being unable to work, with only 9% having an insurance policy in place which paid out and allowed the business to continue trading.  Two firms actually stated that they had been placed in liquidation or bankruptcy because of the owner’s critical illness.  The stakes are clearly high for those firms who have no protection in place.