Business Protection insurance is designed to protect your company against the unexpected death or critical illness of a director or key employee. Essentially, this type of cover will future-proof your organisation through a variety of policy types designed to protect your company, family and employees.
It is likely that you have already considered policies which are designed to protect your physical assets such as stock, equipment and premises. However, Business Protection will act as a safety net by offering breathing space, assistance with succession planning and assisting with overall continuity.
There are many benefits associated with Business Protection, with the most obvious being the financial safety net to ensure operations can continue and jobs are safeguarded. Although, with this type of cover it is also possible to ensure personal requirements, with cover types available to protect both the owners and the employees.
As an individual, it is possible to arrange both life and critical illness cover through your company, reducing the overall cost and tax liabilities. The premiums are often tax deductible and could result in potential savings of up to 40%.
Insured individuals can use their payment however they wish, although there are specific policies designed to provide a specific function. For example, directors may choose to clear debts or buy out a shareholder or partner, in the event of long-term serious illness, disablement or death. This also ensures that the beneficiary receives a fair payment for their inherited share.
‘Business Protection’ is simply a term used to describe the ways you can protect your company against the loss of key employees, owners, shareholders or partners, in the event of death, disablement or long-term serious illness. Many organisations are familiar with policies designed to protect material assets, however policies for the owners and key employees are often areas which are overlooked.
If you are reliant upon a single director or even a key employee, BP is something which you should seriously consider. The appropriate level of coverage could provide your organisation and its loyal team with the financial lifeline needed during a difficult transition period, whilst also offering a variety of tax benefits.
There are a variety of policy options which fall under the BP umbrella, which are suitable for sole traders, partnerships, LLPs, shareholders and senior key staff. No matter how large or small your company, coverage can be arranged to suit your specific requirements.
There are four types of insurance policies which fall under the Business Protection umbrella:
Key person - If there is a particular person which performs an essential function or role, you can insure them. For example, you can take out coverage to protect the company against the death of a partner, shareholder or key employee, or a long-term serious illness if Critical Illness Cover is also taken out. Funds are provided directly to the company, which will be needed to find a suitable replacement and will also replace lost income during the difficult transition phase.
Relevant life - This is an individual life insurance policy which directors, owners and employees that are paid via PAYE can take out. These types of policies are designed to be a death-in-service benefit, so any salaried employees will be eligible. In the event of the policy holder passing away or being diagnosed with a terminal illness, the pay-out is made to the policy holders chosen beneficiary, as a tax-free lump sum.
Loan protection – If a director, shareholder, or partner becomes seriously ill or dies, this type of cover will provide the funds needed to repay the organisations debts or liabilities.
Shareholder/partnership – This is a form of life insurance which partners and shareholders can purchase to ensure funds are available to purchase a deceased partners shares from whoever inherits them. This allows a fair value to be paid to the deceased next of kin and the company is able to regain control and continue operations.
We understand that every organisation is different, so if you would like to arrange coverage but are not sure what type of cover you require, we’re here to help. Please answer a few questions and our partner, My Protection Guru will help find the best protection for you and your business.