SMEs not protected for loss of key staff members

Just one in four SMEs has insurance policies covering key personnel, research has shown.

Concern over SME insurance. Picture Scott Merrylees

New research from Royal London reveals that only a quarter of small and 
medium enterprises have such cover.

It found more than half of senior decision-makers in British SMEs who have heard of this type of insurance not thinking it is important to have a policy. This all comes despite three out of 10 of all SMEs having experienced the loss of a key employee for three months or more due to a serious illness.

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Of those SMEs aware of each type of cover nearly two-thirds believe it is important to insure their business premises, stock and equipment.

Yet only 26 per cent actually have a policy to protect a key person.

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.”

Smaller businesses would face the biggest impact if they lost a key employee, but 57 per cent of businesses with less than 50 employees, who are aware of key person insurance, don’t think it is important.

Larger SMEs are more likely to have experienced the loss of a key employee to serious illness or death and nearly half have taken out a policy.