Most employers insure their buildings, stock, equipment and vehicles. Far fewer stop to think about the people whose knowledge, relationships or leadership are critical to keeping the business running.

In many businesses, especially smaller ones, a great deal can depend on just a handful of people.

If a key person were to die or become seriously ill, the impact could be immediate. Work may become delayed, client relationships could suffer, revenue could be at risk of falling and the rest of the team may be left trying to manage a difficult situation.

This is where key person cover can play an important role.

Key person cover provides a financial safety net for businesses when a key employee dies or becomes seriously ill, helping with the immediate impact and giving the business time to recover.

Here are five useful lessons from businesses that planned ahead.

One of the biggest misconceptions about key person cover is that it's mainly for larger firms. In reality, smaller businesses, who often depend heavily on a handful of people, can be more vulnerable.

A lot can rest on the shoulders of just one person who may have specialist knowledge, look after important clients, bring in sales or play a big part in keeping the business running day to day. There may be no one in place who could take over from them if they were suddenly unable to work.

Growing businesses, who may still be reliant on a founder, director or senior employee to keep their upward trajectory going, can find themselves particularly exposed. Without a plan, the loss of such a person can affect confidence internally and externally, at a time when the business really needs stability.

In the end, it all comes down to how dependent the business is on just one person. If losing them would hit profits, disrupt the running of the business or worry clients, lenders or others, it makes sense to explore business protection.

The phrase “key person” can sound like it only applies to the owner or senior leadership, but this is not always the case.

It could just as easily be someone with specialist expertise, a strong salesperson or a person in finance or operations who plays a vital role behind the scenes.

It helps to think carefully about who your key people really are, rather than relying on job titles.

Ask yourself a few practical questions, such as what would happen if this person was suddenly unable to work for an extended period (or died), how hard would they be to replace, what would it cost and what could the business lose in the meantime?

The loss of a key person can quickly put a business under serious financial pressure.

Work may be delayed, revenue or productivity can take a hit and, in the meantime, the business may need to spend money on temporary support or recruiting a replacement.

In some businesses, there may be additional challenges if the person was closely linked to important client relationships or sales processes. Their loss can also impact the wider team, putting extra pressure on colleagues and affecting confidence or morale. At the same time, competitors may see an opportunity to approach clients or staff, and lenders or creditors may look again at the terms of any borrowing.

Key person cover can help by giving businesses some financial breathing space to deal with the immediate impact and plan what happens next. It could be used to help replace lost profits, support cashflow, cover recruitment costs or repay borrowing while the business recovers.

The main thing is to think about the wider knock-on effects and what support the business would need to keep going.

Businesses often have clear plans for physical and operational risks, such as fire, cyber incidents or damage to equipment, but the risk of losing a key person is often easier to miss.

Claims data is a useful reminder that serious illness or death can affect working-age adults at different stages of life, which is one reason many employers choose to plan ahead.

When a serious illness or death affects a key member of staff, the emotional impact is significant. That is not the moment to start working out how exposed the business is or how it might fund a recovery.

Having cover in place can take pressure off at a very difficult time. Rather than trying to work everything out in the middle of a crisis, the business will have some breathing space and financial support.

It can also encourage employers to consider who would take over if this person was suddenly no longer there and whether too much knowledge or responsibility rests with them.

In addition, it’s worth checking whether support goes beyond the payout. Depending on the provider and the policy, there may also be access to extra services such as wellbeing or rehabilitation support.

There is no one-size-fits-all answer when it comes to key person cover. The right level of protection will depend on the business, the role of the individual and the potential financial impact of losing them.

Asking a few simple questions is a good place to start.

Who does the business rely on most? What would the financial impact be if this person could no longer work? How easy would they be to replace and would the business need extra support in the meantime?

For some employers, the priority may be protecting profits while for others, it may be covering debt, recruitment costs or other financial pressures. The key is to make sure cover is based on the business’s actual exposure, rather than being a rough guess.

For smaller businesses, in particular, this can be a highly beneficial exercise. It may show that the business is in a stronger position than expected, which offers some peace of mind, or it could highlight a weakness, giving the employer a chance to act before it becomes a bigger problem.

No business likes to think about losing someone important, but if your business depends heavily on one or two people, it makes sense to think ahead.

Key person cover can help employers protect trading, manage financial disruption and give the business time to regroup if a critical employee is no longer there. For SMEs and larger employers alike, it can be an important safeguard against a risk that is easy to overlook until it is too late.