Protecting the Business Against the Loss of a Key Woman

The protection planning profession has historically been better at discussing business risk in the context of male business owners. The language has changed — "key man insurance" is now widely referred to as "key person insurance" — but the underlying gap in advice has been slower to close.

Around one in five UK businesses are now women-led, and women are founding new companies in record numbers (over 150,000 in 2022, more than twice the 2018 figure, according to the Rose Review). Women-owned businesses span every sector, from professional services to technology, healthcare, creative industries, and international trade. Yet research consistently shows that women-led businesses are less likely to have business protection insurance in place than equivalent businesses with male founders.

This is not a minor gap. For any business where the founder or a key director is the primary source of client relationships, intellectual property, or revenue, the death or serious illness of that person without appropriate protection in place can be existential for the business — and severely damaging to the financial interests of the owner's family.

This guide addresses the specific business protection planning considerations for women business owners and female directors.

The Protection Gap in Women-Owned Businesses

Multiple factors contribute to the business protection gap in women-owned firms.

Advice gap. Financial advisers have historically been more likely to engage male business owners with business protection recommendations. This is a structural bias in the profession, not a reflection of the relative need.

Underestimation of business value. Women business owners in professional services, creative industries, and consultancy are somewhat more likely than their male counterparts to underestimate the financial value of their business for planning purposes. A consultancy turning over £800,000 per year with the founder at its centre is a substantial asset requiring protection — even if it does not feel like one.

Income structure complexity. Women-owned businesses more frequently involve complex income structures: retained profits reinvested in the business, variable dividend income, reduced salary periods during maternity leave, and non-linear income growth. Standard keyperson calculations based on salary alone may dramatically understate the financial impact of the founder's loss.

Later age at arrangement. Women who start businesses after a corporate career may be in their 40s before seeking business protection advice. While premiums are higher at 45 than at 35, the protection need is no less urgent — indeed, with a growing business, it may be more so.

Identifying the Key Person Risk in a Women-Owned Business

The first step in business protection planning is to quantify the key person risk. For many women-owned businesses, the founder or senior director is:

• The primary or exclusive holder of client relationships
• The face of the brand (particularly in professional services, creative industries, or consultancy)
• The source of the intellectual property (proprietary methodology, creative work, professional licence)
• The holder of regulatory permissions or professional qualifications that the business requires to operate
• The personal guarantor of business borrowings

If any or all of these apply, the business has a significant key person risk. The question is not whether protection is needed — it is how much, and what structure.

Calculating Key Person Cover for a Women-Owned Business

The sum insured for key person insurance should reflect the realistic financial impact of the key person's absence. The calculation should include:

Lost revenue during the replacement period. In professional services, replacing a senior director's client relationships takes time — often 12–18 months. The revenue attributable to those relationships during the replacement period is at risk. A firm generating £600,000 per year attributable to the founder could face £300,000–£450,000 of at-risk revenue during an 18-month replacement period.

Recruitment and onboarding costs. Executive search fees for a replacement at director level typically run to 20–30% of salary. If the role requires a combination of technical skill and established client relationships, the cost may be higher.

Loan repayments. If the founder personally guarantees a business overdraft, loan, or lease arrangement, the key person sum insured should include this amount.

Business goodwill. In a business where the founder IS the brand, their absence may affect the valuation of the business itself — reducing the value that could be realised on a sale or at retirement. While this is harder to quantify precisely, it should inform the overall cover amount.

A common starting point is 5× the key person's share of annual revenue (or net profit if the revenue number is large). For a partner in a professional firm responsible for £300,000 of annual revenue, a sum insured of £1.5 million gives the business the resources to manage the transition.

Maternity Leave and Business Protection Planning

A specific consideration for women-owned businesses that rarely arises in male-founder planning is maternity leave.

A director taking maternity leave is not incapacitated — income protection insurance would not pay out during planned maternity leave. The business, however, still faces a revenue and operational challenge during this period. The distinction between "protection" and "business continuity planning" becomes important.

For the business:

• Key person insurance can provide a lump sum on death or critical illness during maternity leave — the policy does not pause or lapse because the insured is on leave.
• A locum or temporary replacement funded in advance from business reserves or a business continuity plan addresses operational continuity during the leave period.
• Relevant Life Plans continue during maternity leave — the company's premium payments maintain the director's death benefit throughout.

For the individual, statutory maternity pay and employer-enhanced maternity pay provide some income during leave. Income protection insurance does not cover the maternity leave period itself, but should be reinstated on return — particularly important if the IP policy was arranged with employment income as the reference income.

Partnership and Shareholder Protection for Women-Owned Businesses

Many women-owned businesses are partnerships or jointly held limited companies — co-founded by two or more individuals, or held in partnership with a spouse, a family member, or a business partner.

In these structures, the death or serious illness of one partner creates the same risks as in any other jointly held business:

• The deceased's estate inherits the share
• The surviving partner(s) may have no funds to buy that share from the estate
• The estate holds an illiquid interest in an ongoing business, creating conflict

A cross-option agreement combined with life insurance on each partner's life is the standard solution. Each partner insures the other's life (or lives) and writes the proceeds into trust for the surviving partners. On the death of one partner, the trust releases funds to the survivors to buy the share from the estate.

The valuation methodology — how the share price is calculated — should be agreed in advance. For women-owned service businesses, a simple book value is often substantially below the true value of the business (which is largely relationship and goodwill-based, not asset-based). A proper EBITDA multiple or revenue multiple valuation, reviewed every two years, gives the estate a fair price and the surviving partners a defined acquisition cost.

The Relevant Life Plan for Women Directors

The Relevant Life Plan is as appropriate for women directors as for male directors — the tax advantages are identical. The company pays the premiums (deductible against corporation tax), the benefit is not a P11D taxable benefit, and the proceeds are paid to the director's family via trust outside the estate.

For a woman director paying 40% income tax who would otherwise fund life insurance personally, the RLP provides equivalent cover at approximately half the after-tax cost.

One consideration: the sum assured on the RLP should be reviewed following maternity leave if the director's income was reduced during the leave period (statutory maternity pay is substantially lower than normal salary). If the insurer tied the original sum assured to a previous income level, the available cover may be affected. Most insurers allow increases in sum assured within agreed limits on returning to full salary.

Protecting Intellectual Property and Brand Value

For women founders in creative industries, technology, or consultancy, the value of the business may be substantially intangible — built on proprietary processes, creative output, or a personal brand that is closely associated with the founder.

This creates a specific risk: if the founder dies or becomes permanently incapacitated, the business's most valuable assets — the processes, the brand, the creative vision — may not continue without her leadership. No amount of insurance reconstructs a creative vision or re-creates a personal brand.

The protection planning response is twofold:

Insurance: Key person insurance provides the financial resources for the business to manage the transition — to retain clients during a difficult period, invest in a successor, or wind down in an orderly fashion rather than a distressed one.

Business continuity documentation: Separately from insurance, founders should ensure that the business's intellectual property, processes, systems, and client documentation are sufficiently well recorded and systematised that the business is not entirely dependent on the founder's individual knowledge. This is good practice regardless — it also makes the business more valuable and more saleable.

Starting the Conversation

The business protection conversation is often the one that gets perpetually deferred. There is always a more urgent client deliverable, a more immediate operational priority, or a more pressing personal financial need.

The risk of deferral is that the conversation happens after the event — when the business is already in crisis, when the estate is already in dispute, when the funding gap is already real. Protection insurance, by definition, can only be arranged before the event it protects against.

A practical starting point is to answer three questions:

1. If I were to die tomorrow, what would happen to my business, my co-owners, and my family's financial interest in the business?
2. What would it cost the business to replace me — in time, in revenue, and in recruitment?
3. Is there insurance in place to fund those costs, and is the amount still appropriate to the current value of the business?

If any answer is "I don't know", a review is overdue.

How Global Investments Can Help

Global Investments works with women business owners, female directors, and partnership businesses across the UK and internationally. We can review your existing business protection arrangements, identify gaps in key person cover and shareholder protection, and recommend structures appropriate to your specific business and personal circumstances.

We also understand the additional complexity for internationally mobile women business owners operating across multiple jurisdictions — cross-border partner structures, non-UK business interests, and international HNWI estate planning.

Important: Business protection insurance, shareholder agreements, and trust structures involve complex interactions between insurance law, company law, tax law, and family law. This guide provides general information only and does not constitute financial, legal, or tax advice. Rules and legislation may change. You should seek independent professional advice before making any business protection decisions.

---

Global Investments provides wealth management and business protection advisory services to international clients. For a confidential consultation, contact our advisers.