WHAT KIND OF CLIENT CONVERSATIONS ARE YOU HAVING?

Business Conversations

If your clients are business owners, business protection could help them continue to trade if a key person or shareholder gets a critical illness or dies. The proceeds from the cover could help close the gap in income created by the loss of a key person, pay off any business loans and buy back any shares to keep them in business. If your clients are talking to you about business loans or shareholder agreements, talk to them about business protection too. After all, they’ll readily insure their equipment, their premises and their stock. But what about their key people?

GET MORE VOLUME

You could have a ready-made source of business protection clients. Check your book of clients to see which of them own or are partners in their own business. You could also find out if your clients are working for SMEs – if they are, you could ask for an introduction to the Managing Director.

GET MORE VALUE

Review your clients’ company accounts – they’ll help you identify the opportunities for shareholder protection, key person and loan protection. Working with the accountant is also a good way of growing your network of professional connections.

BUILD LIFETIME ENGAGEMENT

Once you’ve set up business protection for your clients, revisit it annually to make sure staff turnover, new business figures and loan repayments are taken into consideration and are reflected in their level of protection.

CASE STUDY

Neel and Priya are business partners running a small gourmet pet food company. Neel is the financial director and Priya is the head of sales. Neel and Priya have both invested their own money in the business. Priya’s married to Ashok and they have a 9 month old daughter.

Priya's PROTECTION NEEDS

Priya's been talking to her adviser about personal protection because since becoming a mum she wants to make sure her husband and daughter are financially supported if she becomes ill or dies. She hasn’t considered business protection. Now’s the time to start the conversation about key person cover or shareholder protection.

AgePriya 32
Salary£46,350
Average of the last 2 years' gross profits£198,000
51%
Priya's shareholding in the business
76%
% of profits directly attributable to Priya

HOW CAN KEY PERSON COVER HELP?

There are a number of different ways in which you can work out the value of a key person. Two of the most common valuation approaches are:

Multiple of salary
7 to 10 x salary 		OR Contribution to profit
2 x average gross profit (apportioned)
or
5 x average net profit (apportioned)

In this scenario, Priya’s adviser is recommending that the business takes out key person cover on Priya. Without her input, it’s fair to say the business’s profitability would be severely impacted.

Average of the last 2 years’ gross profits: £198,000
% of profits directly attributable to Priya: 76%
The appropriate maximum sum assured would be
£300,960

Conversation Tips

  • Use your professional connections to find more potential business protection clients – accountants and solicitors can be good connections to make.

  • If you’re writing pensions for small business owners, review their protection needs as well.

  • Ask your SME clients if they know the value of their key people.

  • Talk about succession planning - it can be a good way of identifying who the key people are.

  • Ask your clients who they think could end up running the business if they don’t have shareholder protection in place – the idea of working alongside the wife or children of a deceased partner probably isn’t one they’ve considered.

  • Ask whether your business owners have articles of association drawn up. If they do, shareholder protection should be your next step.

  • If you’re a protection specialist, your pensions and investment colleagues may be happy to make introductions between you and their clients.

  • Your clients’ business accounts are also a good source of information – the annual return for example gives details of the directors and shareholders.

  • Why not talk about Relevant Life Cover next?

WHAT NEXT ?

Business Protection

Learn about our business protection products on our adviser extranet

Find out more >

Work out the value of a key person

Key person calculator >

Business Protection Solutions

Read more >

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