Less than a third of businesses in the UK have insurance cover to compensate for the loss of key personnel, a new study by the Wealth Management Company has found.
This compares to 95 per cent who have employers or public liability insurance and 85 per cent who are covered for theft and fire.
Around 800,000 small and medium sized enterprises (SMEs) in the UK have no financial cover for the loss of vital staff members, despite the disruption that this can cause.
"The arguments to small businesses on the benefits of key person cover are compelling, given the various impacts on a firm should a vital employee die," said Tom Hays of the Wealth Management Company.
"These include interrupted or stalled contracts, loss of confidence, competitive edge, expertise and innovation.
"Not to mention the knock-on pressure on remaining managers, lowering of morale and replacement recruitment costs," he told All Media Scotland.
There may even be a legal requirement on businesses to plan for personnel issues, with the Insolvency Act of 1986 requiring that they protect against the demise of a company.
If the loss of a key executive or director was found to have contributed to a bankruptcy, this could be interpreted as a foreseeable event with associated liability.
