How to protect your business from the unexpected

While most people will insure their car, their phone, their holiday and their house, surprisingly few business owners take out the necessary protections to guard against the worst happening.

Having the right insurance policies in place can save you and your family enormous amounts of stress – and money – if things don’t work out as planned for your company.

Yet many entrepreneurs don’t even consider taking a few simple steps to protect their business when they’re starting up and therefore risk being stung further down the line.

Indeed, 59% of businesses would cease to trade within 12 months if they lost a key person, according to a report by Legal & General,1 yet many companies don’t have key-person protection in place. For newer businesses, 33% would cease trading immediately if they lost a key person.

Furthermore, the same research shows that 75% of businesses have some form of debt, yet many haven’t taken out business loan protection. Almost two-thirds (64%) haven’t heard of a relevant life plan, a key policy that companies can take out to provide life insurance to individuals.

“At every stage of a company, whether it’s new, growing or looking to exit, there are different risks that need to be considered,” says Alex Cleanthi, Joint Head of Protection at St. James’s Place Protection Planning. “It starts from day one. If you’re a start-up, you need to be thinking about what happens if you’re in a car crash.”

Starting a business is inherently risky, so it’s vital to have the right protections in place – even if it can be uncomfortable to think about your plans being derailed by unforeseen events such as illness. Plus, taking out the relevant policies can help protect your family’s future as well as your own.

You need to think about a what-if scenario and not be afraid to talk about it,” says Dean Hughes, Key Account Manager at St. James’s Place Protection Planning. “It’s important to think about your own family as well. Even though this is business protection we’re talking about, a lot of it comes back to your family and protecting their future.”

If you’re just beginning your business journey, there are must-have protections such as critical illness cover, life insurance and professional indemnity insurance. As the business grows, there are others that become more important, which are outlined below.

It’s easy to shrug off the need for protection by thinking you’re unlikely to suffer from adverse events – or believing that if you do, your personal savings or cash in the company will cover it. This is a dangerous and costly attitude.

“It depends on the importance you put on what you want to happen after something serious takes place,” adds Alex. “’It won’t happen to me’ isn’t something you can rely on.” Instead, consider the main business protections outlined below and always discuss the best course of action with us.

Five key protections

1. Shareholder protection: Also known as business succession planning protection, this ensures other owners of the business (the shareholders) can keep control of the company if one of them dies or is seriously ill.

2. Business loan protection: Most businesses have some form of debt, especially in the wake of the challenges posed by COVID-19, so it makes sense to put a policy in place that helps meet any outstanding financial commitments should you become critically ill or die.

3. Key-person protection: This recognises key people in the company and the impact on profits if one of them becomes ill or dies. A key person can be anyone who can be justifiably described as integral to the business.

4. Relevant life insurance: This is a tax-efficient form of life insurance taken out by the company for an employee, which pays a lump sum to the employee’s family if the person covered dies or is diagnosed with a terminal illness.

5. Group schemes: By introducing employee benefits such as income protection, critical illness cover and private medical insurance, you support the financial wellbeing of employees as well as the business itself.


1 Business Protection: State of the Nation’s SMEs Report 2021, Legal & General, December 2021 (Based on a survey sample size of more than 500 small businesses)

Sovereign Wealth Limited is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website Sovereign Wealth is a limited company registered in England and Wales, Number 07115386. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.