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Majority of SMEs take out protection after seeking advice

Two thirds are happy to be contacted by a financial adviser

Nearly three-quarters (73%) of SMEs who took out a business protection policy did so after seeking advice from an intermediary, a survey shows.

Legal & General’s ‘State of the Nation’ research, which surveyed over 800 SMEs, found that businesses which use a financial adviser are much more likely to be prepared for a critical event such as the death of a key employee.

More than three in four SMEs that use an adviser (78%) had a business continuity plan in place, compared to 57% of other small businesses. This was also the case when it came to business protection policies – 71% of SMEs who had sought advice had a policy that would enable them to buy back shares if a director passed away, compared to only half (52%) of SMEs who do not use an adviser.

Just half (51%) of SMEs were prepared to spend more than £100 a month on life or critical illness insurance, but this rose to more than two-thirds (67%) for businesses that were using a financial adviser.

The report also shows there are still opportunities for advisers to encourage more SMEs to take out cover. A fifth (20%) of SMEs that did not have any business protection hadn’t taken out a policy because they either did not have enough information about it or because no one had advised them to do so.

More than half (51%) didn’t have a business protection policy because they did not see the need for it or did not understand how it could help their company.

However, nearly two-thirds (63%) of SMEs said they were happy to be contacted by a financial adviser. 

Richard Kateley, head of intermediary development at Legal & General, said businesses often don’t think twice about insuring machines, vehicles, computers and offices, but they often forget about protecting their people.

“As these figures show, small companies across Britain remain unaware of how a business protection policy could benefit them. For advisers, there is a clear opportunity to help change the status quo and ensure more SMEs – companies that are the backbone of Britain’s economy – are better prepared should they lose a critical member of staff,” he added.