The tool, which is available on Legal & General’s business protection microsite, www.legalandgeneral.com/business, helps advisers to conduct an informed discussion with their clients about the value of key business people and the amount of protection they may need. Value can be measured in terms of a key person’s replacement cost or the impact of the loss on the business’ profits.
Russ Whitworth, director of underwriting and claims at Legal & General, said: “The loss of a key person can have an immediate impact on a business and its chances of survival may be greatly reduced. This loss could also affect all those connected with a business such as employees, customers and the business owners. We encourage advisers to take the time to get in front of their business clients to explain the potential pitfalls of inadequate protection and the benefits their firm could reap from putting these policies in place. Our key person valuation calculator is a good way for advisers to drive the message home.”
In 2009, Legal & General recalculated the business protection gap at £1.1trillion, of which £400 billion was key person protection. Legal & General’s research, conducted with the British Chamber of Commerce, revealed that 98% of businesses have at least one key individual and 44% said that their business would be unlikely to survive a year if a key individual were to die or have a critical illness.
Last year, Legal & General also launched other calculators including an online business valuation tool to help SMEs calculate how much shareholder or partnership protection they may need. The tool acts as a guide to the levels of cover required based on individual shareholdings and allows the adviser to show the potential financial impact on a business if a shareholder or partner were to be diagnosed with a critical illness or die.