Integra News It won't happen to me! (Business Protection)

It won't happen to me!  (Business Protection)

We are all guilty of this to some extent, right? Where does this state of mind come from? We see tragic events happen to other people from all over the world yet somehow we run with the premise we will always be ok. There is no sense to it. It can only be our personal defence mechanism kicking in to keep us from going insane with worry however, there is likely a better coping strategy.

In life and in business

It’s been said a thousand times (actually much more) that one of the reasons we have a personal protection gap is that people protect or insure risks relating to objects, things, material possessions before they protect themselves or their families. We typically protect cars, homes, laptops, mobile phones much more readily than we insure ourselves.

Businesses are no different, in fact they may be even worse. Rarely, is the topic of conversation in the boardroom about what happens if one of them dies or becomes seriously ill. Yet the statistics are such that this really ought to make its way onto the agenda ASAP!

In a recent presentation, I heard a statistic that at age 49, a male director has a 14% chance of passing away before the age of 70. That is basically a 1 in 7 risk. That really should mean discussion around what happens to the business if that does happen ought to be high up on their agenda for today’s board meeting. After all if there was a 1 in 7 chance the building would collapse, you’d probably head outside wouldn’t you? Incidentally, if we were to consider the risk of a critical illness before aged 70 it’s approximately 36%. We definitely need to be talking about that!

Where do we start?

One of the biggest hurdles businesses have is recognising the risk they are exposed to. These are questions they have not asked of themselves. They also find it hard identifying who the key people are they they need to look at providing cover for.

This changes once the right questions are asked. For example, when Legal & General carried out their “State of the Nations SMEs” research in 2019 they found that 52% ultimately believed their business would fail in 12 months if a director were to die.

So perhaps ask yourself “if you were to pull down the shutters on your business today and re-open down the road next week, who would you make sure came with you?”

An alternative and very 2020/21 relevant question would be “who could you not afford to furlough during the pandemic as they are so vital?”

What is “continuity planning”?

This is a term used to the plans you put in place to allow your business to ride out the bumpy road the firm will travel on when it loses its key people.

These plans might include:-

  • paying for an interim replacement
  • sourcing, training and integrating a permanent replacement
  • repaying business loans
  • repaying directors loans
  • plugging a hole in business profits

The idea that the business “will be ok” or that “everyone will muck in and help” is naive. They will of course be keen to help out however, if it were that simple you would likely not have hired someone to do that job in the first place.

It’s called “continuity planning” since the funds a business gets when a Key Person Life Insurance pays a benefit means the business has a real fighting chance to do exactly that, continue!

Do something positive today and start your “continuity plan” by thinking about the human risks for your business and have they been protected?

Talk to Gavin at Integra

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