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.
Table of Contents
The most significant differences:
Business protection generally incorporates higher sums assured.
Businesses get paid
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.
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.
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.
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
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
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.