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The cost of protecting what matters

22nd March 2017

By Lyndsey Hall

Blog 

Have you ever been ill and still gone to work, because you’re self-employed or a small business owner, and can’t afford the time off?

Now, what if you were suffering from a serious illness, or mourning the death of a family member? Could you take the time off without struggling financially? Would your business be negatively affected?

Unfortunately, for many entrepreneurs taking time out from the business can be an issue. Work gets delayed, clients’ calls go unanswered, and as a result the business begins to flounder. Many self-employed professionals end up in financial hardship after an extended period of sick leave.

But, it doesn’t have to be this way. If you have key man insurance, you won’t have to worry about rushing back to the office when you’re still ill, or grieving.

Key man insurance is a type of life insurance where the key people in your business are covered in the event of death or serious illness. This could be yourself, your managing director, or even a crucial-to-the-business salesman.

According to The Guardian, A study by Legal & General recently revealed that 40% of small businesses would cease trading within a year of losing a key employee or owner. Despite that, 60% didn’t have any protection in place. Of the 5.5m private businesses in the UK, 4.2m (76%) didn’t employ anyone but the owner, leaving no one to pick up the slack if they are unable to work.

Sue Rizzello, then owner of PR company Potion, was diagnosed with ovarian cancer in 2012. After a radical treatment, she went into remission in January 2013, but the side-effects of chemotherapy meant that, despite working from her hospital bed and taking as little time off as possible, the business suffered.

“My accountant had been warning me for years that I ought to have key man insurance in place, but the problem is we tend to think we are immortal. I became ill remarkably fast and it pulled the rug from under the business. I had no key man insurance, no senior person in the firm who could step up, so when I entered chemotherapy almost [as soon as I was diagnosed] I had to effectively virtualise the company, losing the offices and moving everyone to freelance.”

Rizzello has since dissolved Potion and set up a new company called Remedy Services, and has learnt from her past experiences, employing freelancers when necessary and putting business insurance in place.

Johnny Harris, personal trainer and owner of T-tox, a matcha tea company, also learned the hard way. After developing hydrocephalus, a condition involving a build-up of fluid on the brain, aged eighteen. He was forced to take significant time off, and, now a husband and father, he is aware that the condition could return, impacting on his business again.

“I’ve gone from selling myself to selling a product. In terms of future-proofing, it’s about building a business that will support me when I’m not working,”

Faye Smith, owner of Sheffield-based PR, marketing and personal branding company Keep Your Fork, sadly lost both her husband and her twelve-year-old daughter within a few short years of each other. With a business built upon her own expertise and no one to replace her, she was forced to rethink the structure of her business.

“Gabi died on the Saturday morning. My GP came round on the Monday, got her pad out and said ‘I’ll sign you off’. I said, ‘From who?’”

Some of Smith’s generous and friends and clients set up a fundraising page and raised enough money to allow Smith to take time off and grieve, but she acknowledges that it’s not possible to rely on such generosity. Now, the business no longer relies solely on Smith, she has two permanent staff, and a business development manager and freelance help.

 

Unfortunately, it often takes a terrible event like these before business owners realise their cover is not adequate. Nobody wants to imagine the worst, but it is important to prepare for it. Speak to an advisor about the best protection for you and your business.

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