7 Reasons Your Small Business Isn't Protected | Talk To O'Malley
7 Reasons Your Small Business Isn't Protected (And How to Fix Them Before It's Too Late)
As a director, you're managing cash flow, sales, your team, and growth, usually all before lunch. Long-term protection is the thing that quietly slips down the list — often because it's assumed commercial insurance already has it covered.
It usually doesn't. Legal & General's 2022 "State of the Nation" research found £672 billion of UK SME borrowing was unprotected, with 54% of business owners having signed personal guarantees with no fallback in place. Here are the seven gaps I see most often, and how to close each one.
1. Assuming Commercial Insurance Covers "People" Risk
Public liability, employers' liability, property cover — none of it protects the business against the loss of its most valuable asset: the people running it. If a director or top revenue-generator dies or is diagnosed with a critical illness, none of that policy pays out to cover lost profit or a recruitment search.
The fix: Key Person Cover — built specifically to inject cash into the business when a key individual is suddenly gone.
2. Leaving Loans and Personal Guarantees Exposed
Signed a personal guarantee for a loan, overdraft, or asset finance? If something happens to you or a co-director, the lender doesn't write off the debt — they can call it in, putting personal assets on the line without cover in place.
The fix: Match every loan and personal guarantee with Business Loan Protection. If a key borrower dies or becomes critically ill, the policy clears the debt rather than the estate or a personal guarantor.
3. Ignoring What Happens If a Shareholder Dies
No formal agreement in place means a co-shareholder's shares could pass to their spouse, children, or a third party you've never worked with — leaving you in business with someone who has no interest in running it, or facing a buyout you can't afford.
The fix: Combine a cross-option agreement with Shareholder Protection, so surviving owners have the funds to buy back shares and keep control with the people actually running the business.
4. Paying for Life Insurance From Personal, Post-Tax Income
A lot of directors are still paying for life insurance from their own bank account. Relevant Life Cover lets the company pay the premium instead, as an allowable business expense.
The fix: Move it onto a company-paid basis. Done correctly, it's meaningfully more tax-efficient than paying personally — I can work out what that looks like for your specific numbers.
5. Overlooking What Happens If You Can't Work
We plan for death more readily than for six months out of the business through illness or injury. Statutory Sick Pay won't cover a director's mortgage or lifestyle, let alone the business's overheads.
The fix: Executive Income Protection — replaces a substantial share of your income (commonly up to around 80%, depending on the scheme) if you're unable to work, with premiums usually a tax-deductible business expense.
6. No Annual Protection Review
Protection isn't set-and-forget. New debt, senior hires, or a change in ownership structure can leave a three-year-old policy badly under-insured for where the business is today.
The fix: A regular, no-obligation review against how the business has actually changed — I build this in as standard.
7. Assuming Business Protection Is Too Complicated
The biggest reason businesses stay under-protected is friction — the assumption that sorting this out is slow, expensive, and full of jargon. It doesn't have to be.
The fix: 1. A quick chat about your business and borrowing. 2. Tailored, jargon-free recommendations, compared across the market. 3. Everything set up properly — clearly explained, nothing left assumed.
Not sure whether your business is properly protected?
Book a free discovery call and we’ll identify any gaps, explain your options in plain English and help you put the right protection in place
Frequently Asked Questions
What is business protection?
Business protection is a range of insurance policies designed to help protect your company financially if a key person dies, becomes seriously ill or is unable to work.
Do I need Key Person Insurance?
If your business relies heavily on one or more people to generate income, manage clients or oversee day-to-day operations, Key Person Insurance could help protect your business against the financial impact of losing them.
How often should I review my business protection?
Your protection should be reviewed regularly, particularly if you’ve taken on new borrowing, hired key staff, expanded your business or changed your company structure.
Talk To O'Malley Financial Services is a trading style of Commercial Connect Limited, authorised and regulated by the Financial. Conduct Authority (FCA No. 1021324). This content is for information only and does not constitute financial advice. Policies have terms and conditions and may not pay out in all circumstances. Tax treatment depends on individual circumstances and may change. SME borrowing statistics: Legal & General "State of the Nation" research, 2022.
