As business insurance prices rise here are 3 important types of protection you need for your firm

According to the Federation of Small Businesses (FSB), at the start of 2021 there were 5.5 million small and micro-businesses in the UK. As the FSB say, these firms – who employ up to 250 people – “play a crucial role in the UK economy”.

It has been a difficult couple of years for many businesses. Continuing issues with Covid-19, the end of the Brexit transition period, and soaring inflation mean that many businesses are seeing their costs rising sharply at the same time consumers have less disposable cash to spend.

Additionally, a new FSB report, Paying a premium? Reforming the insurance market to work for small firms, says that the lack of availability of affordable and adequate insurance is also proving to be a barrier to growth.

Putting the right protection in place is a great way to make your business resilient to shocks, such as the death of an owner or a senior or vital employee being off work for an extended period.

Read on to find out more about why business owners are struggling with insurance price rises, and for three important types of protection every small business should consider.

 

3 in 5 small businesses have seen their insurance costs rise in the last year

 

Insurance is a vital part of running a business. Whether you’re protecting your premises, vehicles, stock, liability or even your workforce, the right insurance can ensure your business remains sustainable when events adversely impact your ability to trade.

While insurance plays a vital role, FSB research has revealed that most small UK firms have seen their insurance premiums rise over the last year, leaving some exposed to new risks as they decide to forego putting cover in place.

The study found that 3 in 5 businesses (60%) have seen their premiums rise in the last year. Of those whose premium costs have risen, more than half (52%) said that the rise had been 11% or greater. Many other firms reported cost rises far in excess of that – particularly following a claim.

In addition, the FSB research found:

• 3 in 10 said that they find it hard to understand what their insurance covers
• 1 in 6 who have renewed or switched their policy in the last year said that their cover has been restricted.

The research exposes concerns about whether small businesses are able to access the vital protection they need at an affordable price.

The FSB's national chair, Martin McTague, said: “Cover for risks of all kinds – from fire to flood to less tangible dangers – is vital to small businesses’ continued ability to trade, but our report indicates that there are problems lurking under the surface which, if left unaddressed, could further hamper small firms’ ability to compete on an equal footing.”

He adds: “Rising cover prices leave firms caught between a rock and a hard place, forced to pass on higher costs to customers, or to cut back on investment and expansion – or even to risk opting for a lower level of cover, which may leave them painfully exposed if the worst should happen.” 

 

3 types of business protection that can make your company more resilient

 

In many businesses, the staff are the key asset and the company would fail without the skills and experience they bring. So, when you’re thinking about insurance, protecting your team should be one of your first priorities.

Here are three types of business protection you should consider.

 

Key person insurance

 

Key person protection is designed to provide financial support if someone critical to the operation of your business were to pass away. The lump sum can ensure your firm can continue to trade, helping you to replace key individuals, repay debts or provide funds to purchase shares from the deceased owner’s estate

• Key people in your business might include:
• Yourself and any other co-owners or directors
• Salespeople
• People with specific skills or technical knowledge
• Production managers
• Individuals in roles that require particular niche abilities.

Losing one of these people could have dire consequences for your business, so it’s vital that you put the right protection in place.

Key person cover lets you insure your key members of staff for life and/or Critical Illness cover. It will pay out a lump sum if one of these key employees dies (or is diagnosed with a serious illness if you choose the Critical Illness option).

The cash injection it provides ensures your company can continue while you restructure the business or recruit other specialist staff.

While you can replace stock, premises or material goods, replacing a key person is not nearly as easy. Putting the relevant insurance in place will help you to ensure that your business can survive the loss of a key person – including yourself.

We can help you to find the right cover at the best possible price. With insurance prices rising, speaking to us will help you to ensure you get the right cover for your needs, whether you are a sole trader, a partnership, a limited liability partnership or a limited company.

 

Relevant life insurance

 

Relevant life insurance will provide your business with a lump sum in the event of the death of a director, or other employee. The payout can help you to pay off outstanding loans (such as bank loans or director loan accounts) if something happens to a guarantor.

It can also pay a lump sum benefit to an employee’s family if they die or are diagnosed with a terminal illness, while employed during the term of the policy.

As well as a financial payout, many insurers also offer practical help to your business as part of your protection package. A good insurer will generally also offer medical, career and legal helplines as well as support in recruiting temporary or permanent help. 

One of the main advantages of relevant life insurance is that the cost to an employer can work out much less than the cost to an employee of arranging an equivalent personal life policy.

Additionally, in many cases the premiums that you pay for relevant life insurance are viewed as an allowable business expense by HMRC. This means that your premiums could qualify for Income Tax, National Insurance and Corporation Tax relief.

 

Group Critical Illness cover

 

Being diagnosed with a serious illness can be a stressful and emotional time for your employees. So, if you would like to ensure your staff receive financial support in the event they are diagnosed with a serious medical condition, then group Critical Illness cover could be a great choice.

Group Critical Illness cover provides employees with a tax-free lump sum if they are diagnosed with a specified condition covered under the policy. 

As well more common conditions such as serious cancer, strokes and heart attacks, Critical Illness cover typically also provides financial support if an employee is diagnosed with multiple sclerosis, Parkinson’s disease, and a range of other critical conditions.

You can also tailor your group Critical Illness cover so it looks after an employee’s family. Most policies cover children as standard, and many allow your employees to add cover for their spouse or partner. 

This can be a really valuable benefit as it relieves money worries quickly and helps your employees with an injection of cash when they really need it. They can use the lump sum to replace income if they have to take an extended period off work, adapt their home, adjust to a new way of life or to pay for childcare.

 

We can help find the right cover for you

 

If you’re a small business and you’ve seen your insurance costs rise, or you simply want to make your company more resilient to financial shocks, we can help.

As independent experts, we work with dozens of the UK’s leading insurers to find the right business protection at the right price. Find out more or contact us today.