Insuring Your People

If you or your employees suffer an injury, illness or death, there could be serious financial consequences for you, your business or your employees.

Insurance can either provide protection for the business itself, eg to make up any shortfall in profits should the business lose a key employee, or it can be an important benefit for employees, thereby helping you recruit and retain the right people.

This guide provides an overview of the different types of insurance and the ways in which different policies can benefit your business. If you are thinking about buying some insurance protection, it is always a good idea to get expert help from an independent financial adviser.

Identifying risks and insuring against them.

In order to decide on the type of insurance, first identify the risks facing your business and employees.

Certain types of insurance are compulsory for any business and some are required if the business is involved in a particular type of activity or way of operating. Some of the most common types of required business insurance are:

1. Employers' Liability - although you are exempted from this if you own the business and you're its sole employee
2. Motor Insurance

Make sure that your liability insurance is fully up to date. If someone successfully claims personal injury compensation against you, the NHS can now recover charges for treatment (including ambulance costs). This applies to incidents that occurred either on or after 29 January 2007. You can download a guide on the Employer's Liability Compulsory Insurance Act 1969 from the Health & Safety Executive (HSE)

Other insurance is aimed more at your employees:

1. Group Life
2. Public Liability
3. Personal Accident
4. Travel insurance
5. Permanent Health
6. Private Medical

You will want your business to survive major disruption and to re-establish a normal operation as soon as possible after a problem occurs. An effective health and safety policy can help prevent accidents, and a procedure for data backup will enable you to cope with a computer breakdown.
However, some events are out of your control. In these cases, you may find that having the right insurance cover can minimise disruption to your business. You can get insurance for business continuity following the illness, retirement or death of key employees, after a catastrophic event such as fire or flood, computer malfunction or security breaches. Among the types of insurance to consider here are:

1. Buildings insurance
2. Contents insurance
3. Data Processing insurance
4. Goods or Cash In Transit
5. Fidelity insurance against loss as a result of staff dishonesty, such as theft
6. Professional Indemnity insurance
7. Accident and Sickness
8. Key Man Insurance (key personnel)
9. Income Protection
10. Critical Illness or Private Medical
11. Loss of profits

Basic types of Life and Health insurance

Life insurance pays out either a lump sum or a regular income on the death of the person insured. Cover can often be obtained at a modest cost yet it provides a valuable benefit.

Critical Illness cover is available alone or combined with life insurance. It provides cover against being diagnosed with a serious disease, such as cancer, even though the insured person might be able to work. Critical Illness cover can be expensive and is used less than the more straightforward life insurance.

Income protection policies, also known as Personal Accident, Sickness or Permanent Health Insurance, pay a regular income to the insured person who is unable to work because of illness or injury. Cover tends to be expensive for a worthwhile benefit and, in certain cases or occupations, it can occasionally be difficult to obtain cover.

Private medical insurance covers the cost of private medical care. It allows the insured person to receive treatment quickly, or at a time of their choosing, thereby minimising the disruption to the business. The cover can be expensive, though there are many different scales of cover and it can be tailored to the needs of the business.

All of these types of insurance can be bought for individuals, or groups of individuals, and can be used in a variety of ways to provide useful and often essential cover, to meet many needs.

Protecting the Business - Loss of a Key Person

If your business relies heavily on one or two members of staff, there can be serious consequences for the business if they become ill or die.

Small businesses in particular are often dependent upon a key person for generating sales, managing a vital client or providing expertise. You can take out a policy, often called Key Man Insurance, that makes a payout to the business should the key person die or be diagnosed with a serious disease. The amount of money paid out is usually set in advance at a level estimated to be the potential financial loss to the business.

Protecting the Business - Loss of a Partner or Key Shareholder

Loss of a partner - it is important to think about the possible effect of the death or illness of a partner in a business. Insuring the lives of the partners against death or illness can provide the remaining partners with the necessary funds to let them buy the deceased or ill partner's share of the business.

In this way, the partnership's assets remain in control of the surviving partners and the deceased partner's beneficiaries receive a lump sum reflecting the full value of their share. Loss of a key shareholder - in some companies, the shareholders wish to retain control of the company, perhaps within a family. In these cases, agreements are commonly drawn up between the shareholders to ensure that control of the company is retained.

In such cases, it is sometimes worth insuring the life of key shareholders. This ensures that in the event of the death of a controlling shareholder, the insurance payout could be used to purchase the deceased's shares - thereby ensuring that the shares do not pass to other parties.

Need more information about Key Man Insurance? Visit our page dedicated to Key Man Insurance for more details about this product.

Insurance Protection for the Owner-Manager or the Self-Employed.

If you are self-employed, or you own a small business, it is very important that you carefully consider buying the right protection for your own personal needs.

Life and Critical Illness Insurance

Life insurance and Critical Illness Insurance will pay out a lump sum on your death or the diagnosis of certain specified serious illnesses. Depending on your age, sex and health, this can be an inexpensive yet valuable cover.

There are also different types of insurance designed to pay a regular income if you are unable to work because of illness, injury or accident.

The benefit is agreed when you take out the policy, is usually paid weekly or monthly and is subject to a maximum of two-thirds of your normal earned income, though it can be far lower.

The benefit is only paid while you are unable to work, and continues for a limited period, often one or two years. Income Protection insurance and Personal Accident and Sickness iIsurance are both common names for policies of this type.

Private Medical Insurance

Private Medical Insurance covers the cost of private medical care. It allows you to receive treatment quickly, or at a time of your choosing, thereby minimising the disruption to your business. The cover can be expensive, though there are many different scales of cover and it can be tailored to your needs.

Insurance as an employee benefit.

Life and Health Insurance is also a valuable benefit to provide for your employees. It can often be easy and relatively cheap to provide, and plays a major role in helping you attract and retain quality employees.

It is possible to buy Life Insurance for employees individually, but more commonly businesses take out life insurance for a whole group of employees. This is called Group Life Insurance and can be arranged alone, though it is also often found linked to a pension arrangement.

A Group Life Insurance scheme might include all employees who have been working in the business longer than a certain period, such as six months.

Usually, the lump sum insured for each employee is a multiple of their wage or annual salary, subject to a maximum of four times their annual salary. Employers might also set age conditions for the employees eligible to join the scheme.

It is also possible to buy Critical Illness cover for your employees, though this is less common, and is usually combined with a life insurance arrangement.

There is a range of other types of insurance for your employees and the need to provide these benefits may depend on the need to compete with other businesses for the best employees.

Other types of insurance offered as employee benefits include:
1. Private Medical Insurance - pays certain medical bills
2. Income Protection - pays regular income to employees who are unable to work because of illness or injury

Bear in mind that your employees will pay tax on some benefits if they earn more than £8,500 per year. Your accountant or benefits adviser will be able to tell you which employee benefits are taxable. Tax relief is no longer available on any pension contributions paid by individuals which are used to fund life insurance policies.

Compare business insurance quotes with Coverzones. You can get business insurance quotes or buy any one of the policies Coverzones provides now.

The Coverzones service has been designed to provide you with small business insurance quotes in a matter of minutes. Just by answering a few simple questions about your business we can compare products from the UK's leading business insurance companies to help you find the business insurance policy that's right for you. Furthermore, our service allows you to save all of your business insurance quote details in a secure account, so you need never enter them again.