Alongside looking at your personal protection needs have you thought about how important it is to protect your business? Your business is your source of income, so if you are unable to work, not only will your personal finances be affected, but the sustainability of your business could be affected too. Are you aware that you can protect your business with insurance?
How can you protect your Business?
Business protection works in a similar way to personal protection- it mitigates the risk of financial loss of certain at-risk events.
Having adequate Business Protection ensures your business will have access to enough funds to enable it to continue trading by replacing key people and lost income, paying off creditors and or repaying bank loans. It also may help protect against the effects of unknown issues that may arise.
What are some of the policies that could protect vulnerable areas of my business?
Key Person Insurance
Key Person Cover is a type of insurance a company takes out on an individual who they feel is significant in the success of the business. This can be taken out upon death of that individual or upon critical illness too and will usually run for however long you feel that person will be involved with the business.
Without that individual, the company may see a decline in profit and sales, loss of important contracts, additional costs in hiring a replacement and additional work for other employees. All of these result in a detrimental impact on the productiveness of the business.
The injection of a lump sum of money through a key person insurance policy can help a company survive during a time of turmoil. This cash injection can be used to alleviate loss of profits, cover liabilities and non-delivery of contracts, costs of recruiting a replacement individual, or in a worst-case scenario wind up the business and pay redundancy to existing employees.
Our advisers will help you find the right provider at the best price, help select the right sum assured for each key person and pick the correct term of the policy!
Relevant Life Policy
Relevant Life Cover is a way of providing an employee of a business with a death in service benefit, including salaried directors. The monthly premiums for the policy are paid for by the business and the policy is written in trust, paying out to the life assureds chosen beneficiaries tax free if they pass away during the term of the policy.
Although the business is paying for the policy, if the life assured dies and the policy pays out, the company itself will not receive any of the benefit. Because of this, the policy is considered a legitimate business expense and is therefore tax efficient.
Before a Relevant Life Cover policy goes live, it has to be placed in trust, so the benefit is paid to the correct beneficiaries. If the life assured dies within the term, the benefit is likely to be free from inheritance tax as it is in trust, outside of the deceased estate. This ensures the beneficiaries receive the full benefit, giving them financial stability through a very tough time emotionally.
Shareholder/Partnership Protection are policies put into place by businesses to allow the surviving shareholder/director(s) to purchase the shares from the spouse of the deceased Director in the event of death, or from the Director if he wishes to exit the business upon diagnosis of a critical illness. This type of policy helps business owners keep control of their company if one of the owners dies or becomes critically ill and is usually written in conjunction with a shareholder agreement.
Losing a shareholder can have catastrophic impacts on the running of a business, our advisers have the knowledge and experience to ensure the right policies and agreements are in place to minimise this impact.
This type of protection can be complicated and seeking professional advice is important. These are some of the reasons you should consider shareholder/partnership protection:
- Without a policy in place, upon death a shareholder’s stake in the business could be inherited by an unwelcome beneficiary
- The business will be provided with the funds to purchase the shareholder’s stake in the firm, rather than using up capital/savings
- The beneficiaries of the life assured have clarity on how much they will be receiving for the shares when they are bought out by the other shareholders
- The policies and agreements will ensure a smooth transition when shares are changing hands. Keeping disruption to a minimum in a time where stress levels are likely to be extremely high can be important for the survival of the business.
To discuss how to protect your business effectively contact one of our Advisers now!