Many business owners are unaware of options to protect the company should one of the owners die. In a poll of over 800 SME business owners, half (51%) said they would use their own personal wealth in such circumstances, but a quarter (25%) would have to rely on their business’s cash reserves, according to research by Legal & General.

The findings also revealed that while 37% would expect to purchase the business owner’s shares in this scenario, 47% have no specific arrangements to transfer these shares. A further one in five (20%) business owners have no will or instructions about their shares at all, leading to their business facing uncertainty at a critical time.

Unless share protection is in place, the owner’s share in the company may be passed to their family, meaning the surviving owners could lose control of their proportion, or in some cases, all of the business.

Nearly three quarters (73%) of SMEs that took out a business protection policy did so after seeking advice from an intermediary, with the insurer saying this indicates a clear need for advice in this area. Seven in ten SMEs (71%) that 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 that did not use an adviser.

Richard Kateley, head of intermediary development at Legal & General said: ‘It’s clear that losing a business owner would be a devastating blow for most SMEs, so the question remains – why do so many companies remain unprotected?

‘In many cases, the simple answer is that these businesses just haven’t considered it. There is a significant lack of awareness around the vital role that business protection insurance can play to help manage the impact of a business owner becoming critically ill or dying.

‘SME owners who use a financial adviser are much more likely to have a business protection policy such as share protection because they have a far better awareness of the risks and have continuity plans or protection policies in place to mitigate them.