Two important ways business owners need to prepare for death in service

If you are a business owner currently balancing your career and personal life, it may not be easy to consider how an unthinkable event could damage either of these components.

Yet when we asked our business-owner clients about their biggest financial concerns, a huge number said that passing away unexpectedly was at the top of their list.

As such, while it may not be a pleasant subject to dwell on, it is crucial to understand how to shield both your corporate wealth and your family’s money from your sudden passing away. Business owners often miss out on these important protective measures simply because life and work get in the way – but going without might put your wealth in jeopardy if the worst happened.

Keep reading to discover how business owners can prepare for the unlikely event of death in service, plus how a PenLife Financial Planner can help.

1. Shield your family from financial stress

If you were to pass away tomorrow, would your family be able to:

• Continue paying your mortgage and other bills stress-free?
• Cover funeral costs and legal fees easily?
• Pay any Inheritance Tax (IHT) due on your estate?
• Maintain their comfortable lifestyle over the long-term?

If the answer to any of these questions is “no”, it may help to consider how life insurance could fulfil some or all of these needs. This is separate to any key person cover you might need for your business, which you’ll read about in the next section.

According to Forbes, the most recent data suggests that an average of 96.9% of life insurance claims are paid out – but only 35% of the UK population has this type of cover in place.

Plus, the average payout stands at more than £73,000. This impressive amount could help your family to cover funeral arrangements, which cost an average of £4,450 according to Legal & General, leaving plenty to cover ongoing costs and increase their financial stability overall.

Whilst your family’s grief in the event of your death is sadly unavoidable, you can strive to protect them from unnecessary financial stress during this devastating time.

It may be possible to link your life cover to your employment within your business, and to include benefits that may be advantageous to your family if the worst happened. At PenLife, our Financial Planners can assist in creating a bespoke package of personal protection that suits your unique needs.

2. Protect your business from losing revenue

Of course, a major consideration if you are a business owner is not just how your family would cope with your death, but whether your company would survive the event.

Whilst changing hands at the top level of any business usually comes with some issues, after the unexpected death of the business owner, it can be difficult to maintain normal working order and the business could suffer financially.

For instance, clients or customers may become spooked by a sudden change and look elsewhere. Or, without a clear succession plan, other top individuals in your business might struggle to accept their newfound responsibility, leading to potential revenue loss.

A simple, effective way to shield your business from this eventuality would be to put a package of protection in place that buoys your company’s finances.

This might include key person insurance, which offers a potential payout if you or another leading employee dies. This money could be used to cover:

• Recruitment costs
• Legal or marketing advice your business may need
• Business debt
• Any revenue lost during the transition period.

Additional forms of cover that could help your business if you were to pass away include:

• Business interruption insurance
• Professional liability insurance.

Sadly, according to Money.co.uk, 51% of UK businesses “stopped buying at least one form of insurance in 2023”. This means that while some business owners used to be covered, many have halted their insurance, while others may never have taken it out in the first place.

But without the relevant protection in place, your business could suffer financial consequences if you were to pass away while still acting as head of the company.

Financial planning can ensure your family and business are protected in the event of your death

The presence of an independent Financial Planner in your life could help you to create a robust plan, addressing the possibility of death in service head-on.

We’ll work with you, your family, and your business associates to ensure that your personal and corporate protection has every chance of providing the funds needed in the event of your death.

While we can’t always prevent life’s most unexpected twists and turns, we can make an effort to prepare for them.

To learn more about working with our award-winning team, email us at enquiries@pen-life.co.uk, or call 01904 661140.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only. All information is correct at the time of writing and is subject to change in the future.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.