If your business is reliant on a few key employees for its success, whether it’s the directors, some high performing sales people, or a small group of highly skilled workers, losing them could have a swift and devastating effect on your financial future.
Keyman insurance cover can help provide some financial compensation in the event one of these ‘key people’ dies or can no longer carry on in your business due to critical illness or disability.
No matter what sized business you are, or what industry you operate in, keyman insurance protection can provide some reassurance that if the worst happens and you lost an important employee to death or illness, your business could continue with minimal disruption.
But what if you didn’t have keyman insurance in place?
That’s what we look at in this guide to the consequences of not having keyman cover.
Immediate disruption to your business
When a key person leaves your business suddenly it can cause a swift and serious problem to your financial future.
You could see the revenue and profits generated by that employee disappear.
You’ll potentially lose relationships with key clients or customers that had been built by that employee - including losing any future revenue that client or customer would have provided.
Turmoil with your short-term finance
It’s not just the immediate loss of revenue you might see from the loss of a key person.
There’ll be other short-term (and possibly long-term) financial repercussions.
You might have to take on additional staff to cover for the loss of your employee.
You might have to pay recruitment fees to look for a replacement.
You might even have business loans owed by the business which could be repayable in the event an employee dies.
And all this would be happening at the same time you lose revenue.
3. Repayment of outstanding debts
If your business has any overdrafts or loans (for example money borrowed for upgraded machinery or other equipment) you might find yourself in a position of needing to repay them quickly in the event of the death of a key person.
If you don’t have the capital available it could lead to some serious problems for your business.
Even if you do have the funds, there’s no guaranteeing that pulling significant savings out of your business in one go won’t impact its financial future and could put a dent in any growth plans you had - at least in the immediate future.
4. Covering the costs of recruitment and new staff
As much as you might not want to, at some point you’ll need to start thinking about replacing the member of staff you’ve lost.
Depending on their seniority or how niche their skill level, this could result in expensive recruitment costs, which would put further financial strain on your company.
Plus, you’d likely need to pay more to entice a senior person out of another business to yours.
According to some research it can take between a 10% and 20% increase in salary to bring a new person into your business.
If you’re looking at a director or high level executive salary, that could be an expensive increase for you.
5. The future of your business could now be at risk
Losing a key person in your company can put your future at risk in a number of ways, particularly in a financial sense.
With the immediate loss of revenue that employee would have been generated, the loss of recurring revenue from clients leaving because they had a relationship with that person, the loss of skills and experience from the business, and the added cost of recruitment and training, it can take years to recover from the loss of a key person.
All of this is why you need to put some protection in place to protect you financially in the event you lose a key member of staff.
Protect your business with keyman insurance
Keyman insurance should be a serious consideration for any business.
Losing a key member of staff due to death or illness is a traumatic experience.
But as well as the personal loss, there’s always the future of your company and the responsibility you have to its ongoing survival, as well as the people who work for you.
If the worst does happen, keyman insurance can provide you with a valuable, financial safety net that can help cover some of the monetary costs of losing an important employee.
Whether it’s cash to fund the initial loss of revenue, cover the costs of any outstanding business loans, or expense the cost and time or hiring a recruiter to find a new employee, keyman insurance can help.
When it comes to the future of your business, protecting against any eventuality can’t be overlooked.
Find out more about keyman insurance and how it can benefit your business.