Partner Piece – by JHF Wealth

May 17, 2019

Protecting your business

Protection needs change at every stage of your business’s lifecycle. This goes beyond simply increasing your cover as your business increases in value.

Below, we outline how protection needs can evolve for your business at each stage in its lifecycle.

The business lifecycle


Key Person cover – Protecting your profits

Early stage businesses are often very reliant on a small number of key people. Founders and other individuals are essential to the profitability of the company, particularly early on. Losing one of these key people through death or critical illness can have a dramatic impact on a business and its profitability.

In fact, a recent Legal & General survey found that 53% of businesses would expect their business to fold within 12 months following the death or critical illness of a key individual. [1]

Research tells us that more than half of SME owners have no Key Person cover.[1] You can keep your business on track and minimise key person risk with an appropriate key person insurance policy.



Loan cover – Protecting your business from liabilities

Growing businesses will often use leverage to fund their expansion. If a shareholder or a business partner dies or suffers a critical illness, lenders may have the right to claim on any outstanding loans.

You won’t have to worry about this if you have appropriate loan cover. It provides a lump sum to pay off any business loans if one of your business owners dies or is suffering from a critical illness.

Most loans can be protected, including:

  • Commercial loans and mortgages;
  • Venture capital loans;
  • Directors’ loans; and
  • Personal guarantees

For those who have protected their loans, 84% sought professional advice. [1]



Shareholder and partner cover – Keep control of your business

Mature businesses will have built significant value. At this stage, if a business owner dies or suffers a critical illness, their share of the business is likely to be passed on to their estate beneficiary. This beneficiary may have had no previous interest or involvement in the business.

Over 50% of businesses have left no instructions in their Will or special arrangements regarding shares in their business. [1]

The surviving business owners can lose control of the business and to keep that control they’ll need to buy the deceased’s / incapacitated individual’s share of the business.

The trouble is, many businesses will not have the available capital to do this. However, appropriate Shareholder and Partner Cover can be used to pay a lump sum if a business owner dies or suffers a critical illness. To keep full control, this lump sum can be used to purchase the deceased’s or incapacitated individual’s share of the business.



Covering other liabilities – Maximising the value of your business

When exiting a business, it’s important to do everything you can to maximise the price buyers are willing to pay. This includes ensuring all of the other protection policies here are in place to provide the buyer with a safety net to help cover the costs of any relevant liabilities.

To further cover the potential downside of any incoming investor, it may be appropriate to consider some of other main forms of business insurance. Property, commercial vehicle and other business assurances* can all be used to help increase the confidence of your buyer.

At this stage, you may wish to insure against you and/or other senior managers becoming personally liable as a result of litigation. Directors & Officers Insurance can cover this liability.

*May involve the referral to a service that is separate and distinct to those offered by St. James’s Place.

By Bradley Cronk, JHF Wealth

T: +44 (0)207 744 6650; E:; W:

Speak to your adviser to discuss the protection/insurance needs of your business.

JHF Wealth is a trading name of J.H.Flemmings Limited. J.H.Flemmings Limited is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website The titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.

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