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Business owners unprotected and on “edge of collapse” by not having insurance, experts warn

ended 05. August 2025

BUSINESS owners are leaving themselves unprotected and on the “edge of collapse” by not having insurance, experts have warned.

Many businesses are leaving themselves open to ruin if people central to running them fall ill, die or are unable to work for a protracted period. 

Owners often work around the clock to grow their businesses - but many make the mistake of failing to protect what they are building, experts claim.

Scott Taylor-Barr, Principal Adviser at Barnsdale Financial Management, urged business owners to set up relevant insurance.

He added: "The short answer is yes. Business owners are, on the whole, unprotected. Although many will have been forced to take out life cover by their bank if they've taken any type of borrowing, this is to protect the bank. Questions such as 'how does my business survive if I'm out of action for months on end?' or 'how do I pay to buy back the shares of my dead business partner from their estate?' are very rarely considered when a business is being set up. 

"In fact, it only ever gets considered either when it's too late, or when a professional adviser asks these types of questions. It's also important when setting up cover to be clear on what your intentions for the business are. 

"Setting up insurance to support you directly, such as executive income protection or a relevant life plan paid for by a business you intend to sell in the short or medium term, may cause you issues later down the line."

Ross Lacey, Director & Independent Financial Adviser at Fairview Financial Management, recommended the use of Executive Income Protection.

He continued: "We work with a number of business owners and something very common when we first speak to someone running a small / medium business is that they don't really have any contingency should they get ill and be unable to work. 

"A perfect solution to this is Executive Income Protection which can be paid for by the business, so is treated as a business expense and therefore receives corporation tax relief. This acts as a form of sick pay, wherby if the person insured isn't able to carry out their role for any health-related reason, a regular income is paid to the business by the insurer, which can then be used to pay their salary. 

“Far too many business owners underestimate the impact of them being out of action for several months or more through ill-health. Executive Income Protection can really plug the gap and provide a cost-effective solution to this.”

Scott Gallacher, Director at Rowley Turton, shared types of insurance that business owners should consider.

He added: "In my experience, most UK businesses lack protection if a key person dies or becomes seriously ill. Business owners work hard to grow their companies, but too often fail to protect them. 

“Keyman insurance and Shareholder Protection are frequently overlooked, even by majority owners. I’ve seen the consequences firsthand. One majority shareholder died, leaving his widow the business. With no protection in place, the junior directors set up in competition, taking the staff, suppliers, and clients—leaving the widow with nothing. In another case, a minority shareholder was promised a retirement buyout, but after the majority owner's death, the family refused to honour it. Business owners should consider Key Person Insurance, Shareholder Protection, and Business Loan Protection to safeguard their company, their legacy, and their families.”

David Stirling, Director at Mint Mortgages & Protection, added: "Business owners are too often in their business and not looking at the bigger picture. Public and employer liability cover is always a non-negotiable, but business continuity planning almost always sits on the back-burner. 

"This planning includes shareholder protection, that helps buy the shares of a deceased partner from their estate, meaning there is no need to start working with a spouse that was never involved in the business. Key person cover can help a business to keep operating with financial support should a member of the team suffer a critical illness or die. 

“Relevant life cover can be provided for employees and company directors with death in service life cover in a very tax efficient way. Business owners should speak with a specialist adviser to look at gaps in their protection as it could potentially save their business at the end of the day.”

Stephen Perkins, Managing Director at Yellow Brick Mortgages, warned that many small businesses are one issue away from the edge of collapse.

He said: "Millions of businesses across the UK are woefully unprotected. Whether not having powers of attorney in place allowing others to act if an owner becomes incapacitated, or not having shareholder life insurance giving the business the ability to buy-out a deceased owners next of kin. 

“The reality is that most UK businesses are one debilitating condition, or death, away from collapse. Many business owners will insurer their personal and business vehicles, insure their premises but forget to insure themselves.”

Tony Redondo, Founder at Cosmos Currency Exchange, claimed 60% to 70% of small and medium businesses lack protection insurance.

He said: "This leaves them vulnerable if key personnel fall ill, die, or can't work. In good economic times, many business owners prioritise growth over risk management, risking financial ruin. In difficult economic times, business owners focus on cutting costs to survive until better times return. 

"Underutilised policies include key person insurance (which covers the loss of critical staff), business interruption insurance (which funds ongoing costs), and cyber insurance (which protects against cyberattacks). Business owners need guidance to properly assess risks, prioritise key person and interruption cover, review policies yearly, and not skip mandatory employers’ liability.”

6 responses from the Newspage community

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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
The short answer is yes. Business owners are, on the whole, under-protected. Although many will have been forced to take out life cover by their bank if they've taken any type of borrowing, this is to protect the bank. Questions such as 'how does my business survive if I'm out of action for months on end?' or 'how do I pay to buy back the shares of my dead business partner from their estate?' are very rarely considered when a business is being set up. In fact, it only ever gets considered either when it's too late, or when a professional adviser asks these types of questions. It's also important when setting up cover to be clear on what your intentions for the business are. Setting up insurance to support you directly, such as executive income protection or a relevant life plan paid for by a business you intend to sell in the short or medium term, may cause you issues later down the line.
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Editor
Scott Gallacher
Director at Rowley Turton
In my experience, most UK businesses lack protection if a key person dies or becomes seriously ill. Business owners work hard to grow their companies, but too often fail to protect them. Keyman insurance and Shareholder Protection are frequently overlooked, even by majority owners.

I’ve seen the consequences firsthand. One majority shareholder died, leaving his widow the business. With no protection in place, the junior directors set up in competition, taking the staff, suppliers, and clients—leaving the widow with nothing. In another case, a minority shareholder was promised a retirement buyout, but after the majority owner's death, the family refused to honour it.

Business owners should consider Key Person Insurance, Shareholder Protection, and Business Loan Protection to safeguard their company, their legacy, and their families.
Copy

Editor
David Stirling
Independent Financial Adviser at Mint Wealth
Business owners are too often in their business and not looking at the bigger picture. Public and employer liability cover is always a non-negotiable, but business continuity planning almost always sits on the back-burner. This planning includes shareholder protection, that helps buy the shares of a deceased partner from their estate, meaning there is no need to start working with a spouse that was never involved in the business. Key person cover can help a business to keep operating with financial support should a member of the team suffer a critical illness or die. Relevant life cover can be provided for employees and company directors with death in service life cover in a very tax efficient way. Business owners should speak with a specialist adviser to look at gaps in their protection as it could potentially save their business at the end of the day.
Copy

Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
Millions of businesses across the UK are woefully unprotected. Whether not having powers of attorney in place allowing others to act if an owner becomes incapacitated, or not having shareholder life insurance giving the business the ability to buy-out a deceased owners next of kin. The reality is that most UK businesses are one debilitating condition, or death, away from collapse. Many business owners will insurer their personal and business vehicles, insure their premises but forget to insure themselves.
Copy

Editor
Tony Redondo
Founder at Cosmos Currency Exchange
A total of 60% to 70% of UK small / medium businesses lack protection insurance, leaving them vulnerable if key personnel fall ill, die, or can't work. In good economic times, many business owners prioritise growth over risk management, risking financial ruin. In difficult economic times, business owners focus on cutting costs to survive until better times return. Underutilised policies include key person insurance (which covers the loss of critical staff), business interruption insurance (which funds ongoing costs), and cyber insurance (which protects against cyberattacks). Business owners need guidance to properly assess risks, prioritise key person and interruption cover, review policies yearly, and not skip mandatory employers’ liability.
Copy

Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
We work with a number of business owners and something very common when we first speak to someone running a small / medium business is that they don't really have any contingency should they get ill and be unable to work.

A perfect solution to this is Executive Income Protection which can be paid for by the business, so is treated as a business expense and therefore receives corporation tax relief.

This acts as a form of sick pay, wherby if the person insured isn't able to carry out their role for any health-related reason, a regular income is paid to the business by the insurer, which can then be used to pay their salary.

Far too many business owners underestimate the impact of them being out of action for several months or more through ill-health. Executive Income Protection can really plug the gap and provide a cost-effective solution to this.