40% of SME's would cease within a year of losing a key employee
Just 28% of business owners had heard of a relevant life plan, the survey highlighted, but 62% were receptive to the product after it had been explained to them.
However, 90% of the business owners surveyed said they would like to speak to a financial adviser about business protection, after having the product explained to them. However, less than half of those businesses had a financial adviser.
Of the businesses that did have a business protection policy, 89% took out the policy because they had it recommended by a financial adviser, not through personal awareness.
The average UK SME is worth £3.1m and generates a profit of £620,000, L&G's research found. SMEs employ 24.3m or 81.6% of the UK workforce.
The majority (98%) of SMEs have less than ten employees. Meanwhile, the average small business owner is a 48 year old male who has been trading for 12 years. However, L&G found that newer businesses, established within the last 2 years, were more likely to be led by younger and female owners.
Richard Kateley, head of specialist protection highlighted securing against the loss of a key staff member should underpin many small entire businesses.
He said: "Business owners are very good at planning what would happen if they faced an IT failure or security breach yet often overlook financially protecting the business through a lack of awareness or education."
He added: "There is a real need for advisers to guide their clients through the products available and make sure they are prepared for whatever the future may hold to protect the business, their staff and families."