From life cover to shareholder protection and key person insurance

Business Protection is an important consideration for any business owner but often gets overlooked. Having effective Business Protection arrangements can mean the difference between seeing your business survive if something were to happen to you or key persons you rely on or facing an uncertain future, perhaps even closure.

So, if you’re already protecting your physical assets but not your people, now’s the time to make a plan.

What is Business Protection?

Business Protection is a broad term that describes insurance coverage designed to protect businesses and business owners from significant events that can impact on the ability to trade, win new business and retain control over how a business is led.

Business Protection policies aim to provide financial support in order to reduce disruption to a business and allow owners to make the arrangements necessary to recover their business. These forms of insurance usually pay out a lump sum in the event that something significant and potentially catastrophic occurs in order to support the business through uncertain times. For example, this might mean insuring against the death of a key person, someone critical to the functioning of your business, or against the loss of a shareholder, partner or company director so that the surviving business shareholders can retain control over their business.

What kinds of Business Protection are there?

Relevant Life Cover

A Relevant Life Policy is a form of life insurance that can be used to provide a death in service benefit for employees and company shareholder. Death in Service is a popular and affordable employee benefit that many employees expect to receive. It can be used to support family and loved ones in the event of death or a terminal illness and is normally tax-free.

Unlike traditional life cover or group life insurance, Relevant Life Cover has a number of unique advantages to employers and employees.

For employers:

  • Relevant Life can be easier to arrange for small groups rather than group life insurance
  • the monthly premiums are guaranteed
  • premiums are treated as a business expense, so tax-deductible
  • provide cover up to a total sum insured of £10m

For employees:

  • Relevant Life may be more tax effective for high-earners and employees who may have used their pension Lifetime Allowance (the total amount you can save into a pension without additional tax charges). Other kinds of life insurance normally count towards this Lifetime Allowance but Relevant Life cover pay outs do not

Key Person Insurance (‘Key Man Insurance’)

Key Person Insurance (which has been known as ‘Key Man’ or ‘Key Man Insurance’) is a form of life insurance that is designed to provide a financial safety net to a business in the event of losing a key employee. It is not uncommon for businesses to rely on certain individuals, such as key managers, top salespeople, directors or industry specialists who have experience and knowledge that is hard to find or replace.

A Key Personal Policy will typically pay a lump sum to the business directly on death or, depending on the policy options chosen, on diagnosis of a serious illness. This can be beneficial in helping to:

  • Provide a financial cushion to get through an uncertain period
  • Recruit a replacement person, temporary or permanent, or reorganise the business
  • Maintain confidence amongst creditors, industry partners and providers

Shareholder Protection (‘Partner Protection’)

Shareholder Protection (which includes Partner Protection and Partnership Protection, and is also known as Ownership Protection), is a form of life insurance that is designed to pay out a lump sum in the event that one Shareholder or Partner dies. This is normally paid to the surviving Shareholders so that they can purchase shares that will otherwise form part of the deceased’s estate. The benefits of Shareholder Protection mean:

  • Spouses and loved ones of the deceased can receive a cash lump sum, rather than becoming involved in the business or the sale of their shares
  • Shareholders have the financial means to purchase the shares and retain ownership and control of the business
  • A faster financial settlement at a difficult and unsettling time
  • The option of covering serious illness, so a Shareholder can step back when they are too ill to contribute to the running of the business

Give your business the certainty it needs

Creative’s Wealth Management Team of Chartered Financial Planners and Financial Advisers can help you quantify your business protection needs, understand your options and legal arrangements, and put the most effective arrangements in place. Give your business the certainty it needs – talk to Creative today.


Important information about Business Protection Advice

  • These are non-investment, pure protection policies which do not have a cash-in value at any time
  • Some conditions may not be covered by critical illness or income protection policies
  • If you stop paying into a protection policy, you will no longer be covered
  • There may be detrimental tax implications from a pay out of Business Protection; you should contact your accountant to explain the potential impacts in more detail

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