Q&A Sessions

. Ask the Expert Question – June #3

It’s been a tough few months for our business and I’m worried that it will take us a couple of years to pick up our sales pipeline again to the level it was at pre-Coronavirus. I’m prepared to put the work in to make the recovery happen but am worried that if anything happens to me or my partner in the business, such as one of us being in an accident or getting cancer, for example, then we’ll not survive another knock-back. We both have keyman cover but I’m not sure if it would be enough to ensure our survival. What do you suggest?

Carl Lamb of Smith & Pinching Responds

It’s really important that you and your business have plans for emergencies of this kind and key person insurance is an essential element of most emergency plans. However, as your business changes, so will your insurance needs so it’s critical that you review the cover you have in place on a regular basis to make sure that you can survive in the event of a disaster.

A review might reveal, for example, that the amount of cover you have in place is insufficient to give you the breathing space needed to restructure the business if either you or your partner was no longer able to work. You might also look at taking out specific life insurance, for example, to allow the surviving partner to purchase the share of the business from your heirs if one partner were to die or fall seriously ill.   Cover can also be taken out to repay any loans or debts that the business has incurred for which you or your partner may have provided a guarantee. In addition, if you or your business partner yourselves have made loans to the business, then cover can be taken out to repay that to your estate if you were to die before it is repaid.

Critical illness cover for yourselves as partners in the business may also be an option that you might want to consider. 

I recommend that you sit down with an independent financial adviser to look at both your business and personal life and health cover so that you can work out what you need in order to provide you and your partner with a sufficiently robust buffer to keep the business operating in the event of a disaster and to shield your family from any financial implications of something bad happening. 

Any opinions expressed in this article are subject to change and not advice. Protection policies do not have any cash value and will not pay out if at the end of the policy there has been no valid claim.

Carl is both an Executive Director & Chartered Financial Adviser with Smith & Pinching, Chartered Financial Planners