Why has Covid-19 made business protection even more vital?
One way in which financial advisers can provide practical help to their business clients to deal with the financial impacts of the COVID-19 pandemic is to review their business protection insurances.
Where a business already has business life assurances in place, such as shareholder protection, key person cover, loan protection or death in service benefits (such as relevant life policies in the UK) an assessment should be made as to whether they are still suitable.
If we imagine an SME business which is in the unfortunate position of having to make roles redundant, are there ways in which the business owners and the leaving employee can be helped at this difficult time in relation to insurances?
One area to consider is whether the business is paying for any life insurance for on the leaving employee's life. If the business has taken a key person policy on the employee, should the employer continue to pay for it, or would the money currently being used for the premiums be better used elsewhere in the business? Would the key person policy be of use to the departing employee, perhaps for their own family protection? Could that policy be assigned to the employee with them taking on the premiums, and if so, has the business discussed any potential tax implications with their tax advisers?
It's not just key person cover that an employer might be paying for. What is to happen to any relevant life policies, for example? Are the employer and employee familiar with any continuation options under the policy? Can the employee maintain the cover, can it be transferred to a new employer, and if so what are the conditions for this? Acting quickly may be essential if the cover is to continue.
A financial adviser can also help by reviewing the insurance needs in relation to the people who are to remain in the business. Perhaps money which is no longer being spent on life policies for former employees can be re-allocated towards insuring the people who are staying, or increasing the cover already in place? Is there someone in the business who is now more key as a result of others leaving?
As businesses restructure, their insurance needs are likely to change. Financial advisers can be there to help guide their business owner clients through this change.