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RAW - Too many businesses are unprotected if a shareholder or key person dies - RAW

ended 14. August 2026

****NEWSPAGE RAW****

Newspage experts say too few business owners have protection in place that covers in the event that a shareholder or a key person dies, suffers a critical illness, or is unable to work. The consequences can be significant.

Research by Scottish Widows (here) indicates 45% of business owners have never sought advice about business protection. It also highlighted that 23% of SMEs would only be able to continue trading for a maximum of one month if they lost a key person from their business.

For shareholders and their families, the scary reality is that if a shareholder dies, without the right legal agreements and insurance in place, surviving shareholders could find themselves in business with a deceased shareholder's spouse or children, families may inherit illiquid shares they cannot realise, lenders may call in loans backed by personal guarantees, and businesses can lose their most valuable people with no financial safety net.

Unedited views from verified Newspage experts below.

9 responses from the Newspage community

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Graham NicollVerified
Financial Planner, Chartered FCSI at NCL Wealth Partners
Business protection is one of the most overlooked areas of business planning because owners naturally focus on growth rather than what happens if the unexpected occurs.

The death or critical illness of a shareholder can leave surviving owners trying to buy shares from a grieving family with no funding, while business loans and personal guarantees can quickly become a major issue.

Losing a founder or key employee can also mean lost clients, disrupted operations and months of recruitment.

The best outcomes come from seeking advice that looks through three lenses simultaneously: the business, the shareholders and their personal financial planning, ensuring legal agreements, funding and family finances all work together when they're needed most.
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Oliver JordanVerified
Director at Check Financial
Business protection is still too often seen as a “nice to have”, particularly by smaller businesses. In my experience, it’s rarely because business owners don’t see the value, they simply haven’t been made aware of the risks or the protection available to them.

Shareholder protection is one of the biggest areas I see overlooked. For a business with multiple shareholders, the death of one owner could result in problems for not just the business partners, but the family of the deceased too.

What stands out to me is that many of the clients we arrange shareholder protection for had no idea the cover even existed beforehand.
The biggest lesson I’ve seen is that business owners often don’t realise how exposed they are until somebody actually explains what would happen if a shareholder died tomorrow. Who inherits the shares?
Business owners can’t protect against a risk they don’t know they have which is why good advice around business protection is so important.
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Mark AlexanderVerified
Founder at Property118.com
Business protection is still too often treated as an insurance discussion when it should really be a business continuity discussion.

For property business owners, one of the biggest risks is being asset-rich but cash-poor. A family might inherit a valuable portfolio yet suddenly face mortgages, tax liabilities, refinancing and management decisions without the person who previously held everything together.

The same applies to trading businesses. Losing a shareholder or key person can create an immediate need for liquidity at precisely the wrong time. Insurance matters, but so do shareholder agreements, wills, powers of attorney and succession planning.

The objective is to give the family time and financial flexibility to make sensible decisions rather than forcing a rushed sale or expensive refinancing.

As I wrote recently: “Inheriting property is not the same as inheriting cash.”
https://www.property118.com/could-your-family-afford-to-keep-your-property-portfolio-after-you-die/

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Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
Business protection is still treated far too often as an optional extra, when in reality it is business continuity planning.

Owners will insure a £40,000 vehicle without hesitation, yet sometimes leave the person responsible for millions of pounds of revenue completely uninsured.

The area I see overlooked most is key person cover, particularly in owner-managed businesses where one or two individuals hold the relationships, technical knowledge or sales ability that keep the company moving.

The biggest lesson is that death or serious illness does not just create an emotional crisis. It can create an immediate cash-flow, ownership and control crisis at exactly the same time.

Business owners should ask one uncomfortable question: if I, my business partner or my most important employee disappeared tomorrow, would this business still function financially? If the answer is unclear, the protection planning probably is too.
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Harvey DhillonVerified
Founder & CEO at Zmartly
Yes, most owners still treat business protection as an optional extra, and they are wrong. Every business plans for the machine breaking, and almost none plan for the person breaking. Cover belongs in the continuity plan, next to the fire drill. The most overlooked is loan protection. A personal guarantee is signed once and rarely looked at again. It is also the one you can size to the pound. Add up the bank debt you have personally guaranteed, and any money you have drawn from the company and not repaid. Your estate must repay the drawn money, and meet the guarantee too if the company cannot. That is what your family faces alongside the shares. Claims and disputes are not my lane, but the lesson I do own is wording. Business Relief cuts the inheritance tax on unquoted shares in a trading company. If your shareholders' agreement obliges the estate to sell and the survivors to buy, that relief goes. Options on both sides keep it. Get the agreement read before you buy the policy.
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Guy SkinnerVerified
Financial Planner and Director at Citygate Financial Planning
Business protection isn't viewed as a "nice to have" it's a case of start ups growing on a shoestring through a cost of living crisis, commonly unaware of the protection available. After surviving the early years to a point in time protection is more affordable, owners often think (wrongly) that they've mitigated risks through processes to replace key people. Then there's the lack of knowledge about inheritance tax. The question is more about what the business owner wouldn't want their family, colleagues and business partners to deal with on death or ill health, than a utopian view of abundant money. When reality bites that a huge mess would ensue (and that's before money is involved) people understand.

The biggest issue is will be with £5M+ family businesses as business property relief will likely be "capped out" with the parents share. A business with illiquid assets or high value intangibles, or large capital requirements will potentially become insolvent when faced with the IHT
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Ross LaceyVerified
Director & Independent Financial Adviser at Fairview Financial Management
It's important for business owners to consider the what-ifs and make a conscious decision whether it's important enough to them, to deal with certain situations that could be protected against.

Part of this is knowing what would happen, considering the impact, and understanding the cost of protection.
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Scott GallacherVerified
Director at Rowley Turton
Sadly, many businesses still overlook business protection, and I’ve seen firms collapse following the death of a major shareholder.

In one case, the deceased held the majority of the shares, so his widow seemingly held all the cards. Instead, the remaining directors set up a competing company and took clients, suppliers and staff with them. She was left with little more than a shell company and a fire sale of the remaining assets.

Proper shareholder protection insurance and legal agreements could have prevented this.

I’ve also seen Key Person policies used for husband-and-wife businesses where a Relevant Life Policy may have been more tax-efficient and flexible. It can give the survivor the option of supporting the business if they wish, but also the freedom to wind it up and retain the proceeds if that is the better choice.

Business protection is about having the right cover, ownership and legal structure in place before it is needed.
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Paul DenleyVerified
CEO at Oakham Wealth Management
The challenge is that smaller businesses will often avoid costs wherever they can, particularly when the owners are also the people managing the business. There can be an element of simply accepting the risk, because ultimately they stand to lose the most if something goes wrong.

From my perspective, key person cover is probably the most needed yet most overlooked area. Owners focus on protecting the physical assets of the business, but the real value often sits heavily in the people who generate the relationships, revenue and expertise.

The real test is simple: could the business continue if one of those people was suddenly no longer there? If the answer is no, protection should arguably be part of the core business plan, rather than an optional extra.