If Your Top Team Member Fell Ill, How Would the Business Survive?
Why It’s Time to Review Your Business Protection Plans
Imagine waking up tomorrow and discovering that your operations director, technical lead, or top-performing sales manager is suddenly unable to work due to illness or injury. Beyond the human impact, how would your business cope financially?
Research by Legal & General found that 59% of businesses believe they would have to stop trading in less than a year after the death or critical illness of a key individual.
For many small and medium-sized businesses, the answer is—not well.
That’s where Key Person Protection comes in. It’s not just a policy—it’s a business continuity strategy that helps companies protect themselves against the financial fallout of losing a key team member temporarily or permanently.
What is Key Person Protection?
Key Person Protection is a life insurance or critical illness policy taken out by a business on a crucial employee. If that person were to die or become seriously ill, the policy pays out directly to the business, helping it:
• Offset lost profits
• Recruit and train a replacement
• Cover outstanding debts or reassure creditors
• Maintain stakeholder and investor confidence
It’s the financial buffer that allows you to buy time to regroup, rather than make rushed decisions under stress.
What is the difference between relevant life and key person insurance?
Relevant Life Insurance is focused on providing benefits to employees, while Key Person Protection is about safeguarding the financial interests of the company in case of the loss of a key individual.
Who in my company will need key person cover?
Key Person Protection can apply to any individual deemed to be critical to your business, but to help you think of your company’s needs, here are some roles that are typically covered by key person insurance:
Owner/founder CEO Operations manager IT manager
Web developer Sales lead Employees with lots of contacts Exceptional talents
What Kind of Businesses Should Review Their Protection Plans?
The short answer: Most of them.
But it’s especially important for:
✅ Limited Companies
Where founders or directors play multiple roles, the absence of even one can cause significant disruption. Protection can also help in retaining shares in the event of a death.
✅ Owner-Managed or Family-Run Firms
Smaller businesses often rely heavily on the skills, reputation, or relationships of one or two individuals. If one is suddenly absent, it can directly impact revenue or operations.
✅ Partnerships
In a professional partnership (e.g., legal or financial services), losing one partner can trigger serious financial and legal complications, especially without a shareholder or partnership agreement in place.
✅ Fast-Growing Startups
In businesses scaling quickly, senior staff tend to hold a vast amount of operational and strategic knowledge. Their sudden loss can derail growth and invester confidence.
Tax Implications: What Small Businesses Need to Know
From a tax perspective, Key Person Protection has a few important considerations:
• Premiums are typically not tax deductible if the policy benefits the business (which is usually the case with Key Person cover).
• Payouts are usually considered a trading receipt and therefore taxable. That said, this varies case-by-case, and advice should be tailored.
• If the policy is written to cover a loan or other specific liability, the treatment could be different—another reason to seek financial planning support.
In other words: get advice. Setting up a protection policy without understanding the tax consequences can lead to unexpected outcomes.
Why Now?
Post-pandemic, the risks have never been clearer. And with rising costs, geopolitical instability, and a volatile economic environment, resilience isn’t just a buzzword—it’s essential.
Reviewing your business protection strategy could be one of the smartest moves you make in 2025.
How SN Financial Can Help
At SN Financial, we’ve spent over 20 years supporting business owners in Droitwich, Sevenoaks, and beyond with robust, personalised protection strategies. Our team works closely with you to:
• Identify key individuals in your business
• Structure protection policies in a tax-efficient way
• Coordinate with your accountant and solicitor
• Future-proof your succession and continuity planning
Let’s make sure your business can keep going—even when life throws the unexpected your way.
For more on Key Person Insurance https://snfinancial.co.uk/protection/key-person-insurance/
For more on Relevant Life Insurance https://snfinancial.co.uk/protection/relevant-life-insurance/