What is Business Protection?
Business Protection is an umbrella term which covers three main types of cover – Key Person Insurance, Partner/Director/LLP Share Protection and Relevant Life Insurance. Each is designed to address problems faced by businesses up and down the land every day – the illness or death of either an important member of staff or a business owner, director of partner. Those problems could include profit losses, loss of direction or even the forced sale of shares to a competitor, for example. (Relevant Life Insurance provides a lump sum for the family / beneficiaries of an individual director / employee – i.e. an alternative to traditional group death in service schemes. It is not intended to provide funds for share protection / key person protection.)
What is Key Person Insurance?
Key Person insurance is a type of life insurance bought by businesses on the life of an employee whose illness or death would seriously jeopardise the profits of the business. That could be a chief executive, a top salesperson, finance director – or even the owner of the company. The policy provides a cash injection to help find replacement staff and cover lost profit streams. (Some banks require the cover to be in place when accessing finance – also known as business loan protection.) A Critical Illness cover option is available.
Premiums are based on age, health and lifestyle but it is the business that pays the premiums and would receive any pay-out.
What is Partner/Director/LLP Share Protection?
Partnership/Director/LLP Share Protection helps business owners keep control of their company if one of them dies or is diagnosed with a serious illness. This type of life insurance will ensure there are funds to help the remaining shareholders purchase the shares and retain control of the company, avoiding a period of uncertainty or family beneficiaries arguing with other owners about the direction of the business or, for example, the shares being bought on the open market by a competitor. A Critical Illness cover option is available.
What is Relevant Life Insurance?
This is a term assurance plan which is purchased by an employer to provide a death in service benefit for the beneficiaries of an individual director / employee. Generally, it’s tax-efficient for both employer and employee. Premiums are tax-deductible for the employer and as the policies are set up under a discretionary trust, any lump sum pay-out is tax-free and not subject to inheritance tax.
The level of cover is usually a multiple of salary and any bonuses earned by the individual in question and any pay-out is made tax-free to the deceased’s dependants.
Where can I find out more?
You will need to ask yourself a number of questions. Who to cover? How much? How long? What could be the tax liability? Different providers will offer a variety of rates and levels of cover so it is important you seek qualified financial advice to ensure you get the cover that is right for you and your company. A qualified financial adviser will be able to offer tailored advice based on your particular circumstances and the circumstances of your business.
Please call 01452 623633 to arrange a no obligation meeting with a qualified Brunsdon Financial Adviser.
Please note that this information is not fully inclusive and is intended to provide general information only. It does not constitute personal advice. We recommend you talk to your Brunsdon Financial Adviser for further information and qualified advice.