New research conducted by Legal & General, the FTSE 100’s insurer, highlights the potential for severe consequences should an SME become affected by critical illness.
The findings, part of the biannual 'State of the Nation's SMEs' report and based on answers from more than 800 respondents, found that small businesses are ‘particularly prone’ to folding if a key employee passes away or takes long-term sickness leave. In fact, 67% of new companies and 73% of sole traders say they would likely have to close down after just one year.
The most recent survey by Legal & General highlights a gap in legal protection – an issue that many UK businesses will face. It shines light on the need for expert financial advice.
Some of the main findings from the report show that, of the 800 enterprises surveyed, 65% hold some form of business debt and 51% of business owners ‘leave no instructions about company shares in a will’. This means they're particularly vulnerable in these kinds of circumstances.
Insurance policies for sole traders and SMEs
While the report shows small business owners are significantly aware of the impact of the loss of an employee, it also highlights a widespread lack of protection through insurance policies. 63% of new companies with one owner and 72% of sole traders did not have personnel cover.
Richard Kateley, Head of Intermediary Development at Legal & General, said:
“Many owners are focused on the day-to day pressures of running their business and its profitability. However, a high number lack vital cover for unforeseen events or possibly are unaware of the risks that they may be facing.
With the right knowledge, businesses are better placed to make the right decisions in protecting themselves. This begins with adviser/client conversations and properly evaluating the risks a business faces.”
To learn more about keeping your SME's cashflows stable, contact a Dukes Bailiffs operator today.