What would have the worst effect on your business?
1. Your business mobile phone is stolen
2. The photocopier breaks down
3. Your premises are broken into and vandalised
4. A business vehicle is written off
5. Your co-owner has a heart attack
You probably have insurance to cover four of these situations. But what would happen to your business if the worst thing on the list happens - and your co-owner suffers a critical illness? Would your business still be able to meet its obligations?
Business protection is an important part of the financial planning process for your business. It can help to pay off business loans, provide cover for key employees or help to make sure the remaining business owners keep control of the business. But unfortunately, it´s one area that´s often overlooked.
Business Loan Insurance
According to the Financial Conduct Authority (FCA) financial Live 2020 survey, before Covid-19, use of credit was high. Most (85%) adults held at least one credit or loan product, up from 78% in 2017. A quarter (26% or 13.4m) had been overdrawn at some point in the previous 12 months, while 5.6m held a high-cost loan at the time of interview or in the previous 12 months.
Usage of FCA-regulated credit or loan products peaked for adults in their mid-20s to mid-40s. An astonishing 58% of small businesses don´t have any cover in place to repay it if the worst should happen.
- Do you have a loan account for your business?
- Have you provided a personal guarantee for a business loan?
- Does your business have an overdraft or any other debt?
If you answered yes to any of these questions, have you thought about what would happen if your business couldn´t
repay these debts? A business protection plan could be a great way of helping to repay business loans if a shareholding director or partner dies or can´t work because of a critical illness.
Relevant Life Plan Insurance
If you have a successful business that you´ve worked hard to build, you´ll want to protect it.
Did you know that because you´re a director of your own company, your life cover could give tax benefits as well as peace of mind that your family would get a payout if the worst should happen? If you´re paying for life cover from your own bank account you´ll be paying out of post-tax income. And if you pay for it from your business account you´ll probably be taxed on the payment as if it were income.
Larger companies avoid this tax by providing life cover for employees through a registered group life scheme. You can take advantage of the tax benefits larger companies get by taking your life cover out through a relevant life plan.
These are open to all companies no matter how small, and you could also provide life cover for your employees even if you only have a few. With this type of plan, the cover won´t count towards the pension lifetime allowance and can free up your clients to maximise their pension investment. And with typical multiples of 15 to 20 times salary, depending on the age of the life assured, your clients could get a higher level of cover.
What is relevant life insurance?
Relevant life insurance is an insurance policy that a business can take out to provide life insurance for an individual employee.
Who is it suitable for?
Those who run or work for a business that does not provide a group life insurance scheme (perhaps because it is too small to qualify for one), but would like the business to arrange life insurance as an employee benefit in a tax-efficient manner for themselves or another individual employee;
Those who run or work for a business which does provide a group scheme, but would like to arrange additional life insurance that doesn’t count towards any annual or lifetime pension allowances (this may be of particular interest to high-earning employees who may be near their pension limits);
Partnership (LLP) Insurance
Financial protection is an important part of the financial planning process for your business. And unfortunately, it´s often overlooked.
We know the benefits of personal wills - they make sure the money goes to the people you´d want to have it.
But have you done the same for your business.
- What would happen to your business if a partner or member became critically ill or died?
This could cause serious financial problems. For example:
- Your business may have to run without one of the key people who contribute to its success - The partner or member might be off work for a long time. But they may still expect to get an income from your business despite being unable to contribute.
- You may need to find and train a temporary replacement which could mean paying two salaries instead of one.
- The partner or member might want to sell their interest in the business if they decide not to return to work. Would the other owners be able to buy them out? - Would their family get a fair value?
- Would you want their family to get profits from the business when they are not contributing to running it?
- Would the bank lend your business money if it was in financial difficulty perhaps due to the loss of a partner or member?
Don´t leave it to chance. We can help you take the first steps to protect your business.
Business protection can pay out on the death of a partner or member. And a legal agreement can make sure the payout will be used to buy the share of the business from their estate.
A similar payout can be made if one of the partners or members suffers a critical illness.
Shareholder Insurance
Think of all the valuable assets that belong to your business - machinery, premises, equipment, supplies, and technology.
Most companies make sure they´ve protected valuable assets from fire or theft - but many don´t consider the financial value of their people.
What would happen to your business if a majority shareholder became critically ill or died? This could cause serious financial problems. For example:
- Your business may have to run without one of the key people who contribute to its success.
- The shareholder might be off work for a long time. But they may still expect to get an income from your business despite being unable to contribute.
- You may need to find and train a temporary replacement - which could mean paying two salaries instead of one.
- The shareholder may want to sell their shares if they decide not to return to work. Would the other shareholders be able to buy them out?
Don´t leave it to chance. We can help you take the first steps to protect your business.
Business protection can pay out on the death of a shareholder. And a legal agreement can make sure the payout will be used to buy the shares of the business
from their estate.
A similar payout can be made if one of your shareholders suffers a critical illness. Many companies overlook protecting the business from the financial impact of losing a shareholding director or key employee through death or critical illness. But it should be a priority.
If you would like to discuss the benefits of Shareholder Protection with us in more detail, contact Abi Ladele or our admin at This email address is being protected from spambots. You need JavaScript enabled to view it.
