Business insurance for business professionals
Business protection is the term used for a range of insurance products available to Directors & Shareholders of businesses. In most cases Business Protection is paid for, you guessed it, by the business & NOT the individual it covers.
There are many different types of business protection that we’ll look at on this page, but as an overall summary, business protection allows business owners to plan for the unexpected by taking cover against some of their business risks, which means that if anything were to happen, such as loss of a key employee, the death, critical illness or disablement of a director or any other defined event, the business could continue to trade with minimal disruption, particularly financially.
A relevant life plan is a type of life insurance, paid for by a company, that can cover an individual Director or employee of a business in the event of their death. This is a popular type of cover to take for businesses who don’t have a group life scheme & is very well suited for smaller companies with fewer employees. It can make employees feel valued & is a great added benefit for them to have.
For Directors, it’s a way for the company to pay for your own life insurance, rather than paying for it personally. All premiums may also be treated as an allowable expense for the company when calculating your tax liability, but you should specifically confirm this with a suitably qualified accountant.
This type of policy can be used to fund a named employees, including company Directors, ongoing sick pay so the business can meet it’s financial commitments while an employee is off work but being paid sick pay. If the named employee becomes incapacitated due to illness or injury, the insurer pays your business a regular monthly benefit, after a defined period of time, to cover sick pay costs. A great way to cover yourself & your business, or to offer benefits to employees to attract the best talent, whilst reducing your business risk.
Key person protection is life cover, with the option to add critical illness cover in some cases, for a specified key member of staff within your business. This staff member is usually someone who is of a high level of importance to the business & who the business depends upon heavily. You can take this kind of protection out for yourself, known as own life in trust, or you can take it out for the life of another staff member. If the covered person suffers a critical illness or dies, this type of policy will pay a benefit directly to the company so the company can continue to meet it’s financial needs without this individual, and to buy time to recruit someone to replace the individual where necessary so the business can continue to operate.
Key man insurance can be taken out by limited companies, partnerships or sole traders but is less frequent for sole traders due to the nature of their business structure.
Similar to Key Person Protection detailed above, this type of cover is taken out by a business to cover someone who is very important to the businesses success. The main difference is rather than a lump sum payment being made on death or diagnosis of a critical illness, this type of policy pays a monthly benefit to the company if the key person becomes unable to work due to illness or injury. This money is usually used to hire a temporary replacement employee or to meet the company’s loan repayment requirements. It provides monthly cash flow for the business.
Shareholders protection is insurance to cover a business in the event that a shareholder dies. In usual circumstances without shareholder protection, if a shareholder passes away, their shares will be passed to their spouse or through probate to somebody else. This can lead to someone coming into the business who has no prior knowledge of the business, which can be very disruptive.
Shareholder protection is an agreement between owners and shareholders that if one of them were to die, the remaining shareholders would have the right to buy the deceased shares with the funds of the policy, so they can retain control of the business, while fairly compensating the deceased families. This type of policy is often supported legally through creating a cross option agreement.
Without Shareholder protection, often shareholders can find themselves in a position where they don’t have the capital to pay out a party who has inherited the deceased shares, which can cause huge complications & put the business at risk.
In simple terms, Business Loan protection contributes or covers the costs of any financial commitments a business may have towards loan repayments in the event of key people in the business dying or becoming terminally ill. Critical illness cover may also be added to a policy like this in some cases. These funds can be used to repay Directors loans, commercial mortgages on property owned by the business, or other associated loans.
A lot of the policies mentioned on this page may be considered an allowable expense for the business & therefore could potentially reduce your tax liability. All tax matters should be confirmed with a suitably qualified accountant. We aren’t tax advisors & do not give tax advice.
We’ll help! We’ll sit down with you & discuss your business, how it operates, how you make your money & what obligations the business has. Once we’ve gathered all of the relevant information, we can make tailored recommendations to suit the needs we’ve identified to make sure you leave the conversation with peace of mind.
We partner with you on a long term basis so as your business evolves, so can your insurance.
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