Only a quarter of small and medium-sized enterprises (SMEs) insure their key staff. This is despite three out of ten companies in the sector admitting to having lost the services of a crucial employee for three months or more due to a serious illness.
These are the findings from the latest research carried out by Royal London, the UK’s largest mutual life insurer. The company revealed that only a quarter (26%) of SMEs have insurance covering the key people in their business.
In addition, over half (51%) of the senior decision-makers in British SMEs who have heard of this type of cover said they don’t think it is important to take out such a policy. Key person cover provides a lump sum payment if a named employee suffers a critical illness or dies. According to Royal London, this attitude could be down to a lack of awareness, even though 30% of the companies surveyed admitted to experiencing the loss of a key worker for more three months or more due to illness.
Of those SMEs which were aware of such cover, nearly two-thirds (65%) believed it was important to insure their business premises, while a similar proportion (62%) covered their stock and equipment.
According to Royal London, smaller businesses would face the biggest impact if they lost a key employee. But 57% of businesses with less than 50 employees, and who are aware of key person insurance, don’t think it’s important enough to do anything about it. The figure reduces a little to 53% for larger SMEs representing businesses with 50 to 249 employees.
Nearly 800 company owners, proprietors, chairpersons, and other senior level executives working for SMEs were surveyed by Royal London. “With a record 5.7million SMEs in the UK, a lot of businesses are leaving their futures exposed to loss of a key employee through serious injury, illness or death,” commented Ian Smart, product architect at Royal London.