Business protection could help client owned businesses continue to trade should a key person or business owner die or become terminally or critically* ill. Proceeds from the policy could help ensure that key individuals are replaced, corporate debt is protected and shares from the deceased partner’s/director’s estate are purchased.
Many believe arranging business protection to be a lengthy and complicated process. The principles and processes are similar to other types of protection.
The most significant differences are:
Business protection generally incorporates higher sums assured.
A claim may be paid to a business, not a family member.
Protecting people should be an integral part of any business plan. Business owners already protect many of the important things that keep the business running smoothly, like property, fleets and stock. You should also insure your most valuable assets: staff and shareholders.
Key person and Share and Partnership cover can include Life insurance or Life insurance with Critical illness cover. Life with Critical illness cover includes terminal illness protection as well as free Children’s cover.
Ownership – If a partner or shareholder dies or is diagnosed with a critical illness, the proceeds help the remaining owners buy the affected individual’s share of the business. Without protection, the surviving owners could lose control of the business, impacting on-going success.
Profit – If a business loses a key person who influences revenue, the policy gives the company a cash injection, helping replace lost profits and possibly recruit a replacement.
Debt – If the business loses a key person, the money paid by the policy can be used to clear loans or other debt. Without a cash injection, investors and creditors (like the bank) may call in debts as they’re no longer confident the business can keep on top of them.
Business Protection Q&As
There are many forms of business protection and listed below are a few:
1. Shareholder protection – Protects company shareholders
2. Partnership protection – protects partners
3. Business life insurance – protects your employees
4. Business loan insurance – money to pay off debts should the worst happen
5. Key person insurance – protects a key individual within your business
6. Relevant Life cover – protects all staff members who are paid a salary
There are many providers of business protection. Most of the major insurers do but they will only flog you their own policies and do not search the whole market for you. Finding the best and most suitable one for you is a minefield because you need the right cover, for the right term and you need to set the policy up correctly and write the policy in trust.
Business protection is an insurance policy which is designed to pay a cash lump sum to a company should the person insured die or contract a critical illness. The person in the business may be a key person such as a director or partner. The policies are life insurance and critical illness cover policies, but they are written in trust, so the money can go back into the business.
An example of where this could be effective is, if one of the directors of your company dies then how would the business be affected? Could the business survive without that person?
The idea that the money from the insurance policy would be sufficient to repay the surviving family the shares that director owned in that business, as well as leaving enough money to replace that person with someone else who could do the old directors job. It will also give enough money for the business to continue trading for a little while whilst you replace the deceased person.