Business Protection

Protect Your Livelihood

Business Protection Insurance provides a financial safety net for your company if a key individual, shareholder or partner dies.

The cash lump sum payout is designed to keep your business afloat during such difficult times. Add Critical Illness Cover to pay out if a key individual suffers a serious illness such as some forms of cancer, heart attack or stroke. There are three main types of cover:

  • Keyman Insurance
  • Shareholder Protection Insurance
  • Business Loan Insurance.

Do we need business insurance?

When business owners think about protecting their company, they firstly think of assets such as vehicles, premises and stock.

While nearly everyone insures these, many forget about what’s most valuable — the people behind the business. No matter the size of your company, there’s usually at least one or two key people the business simply couldn’t do without.

Key people might include:

  • Business owners / directors
  • Sales directors
  • Chief technical officers
  • Chief financial officers
  • Anyone else who significantly contributes to the company’s ongoing success.

Whatever the individual’s role, losing them can cost more than just recruiting and training fees. Business Protection can help make up for:

  • Loss of profits
  • Losing important personal or business contacts
  • Loss of confidence from suppliers and customers
  • Loss of detailed knowledge of the company’s processes and systems.

It can also provide the funds to:

  • Repay a loan the key person has made to the business
  • Repay an external loan / venture capital funding
  • Repurchase an absent shareholder’s shares.

The business protection research

Legal & General found that 59% of businesses would fold within a year if they lost a key person. Yet despite this, 75% of companies have never heard of a Relevant Life Plan or Executive Income Protection plan.

The research also found that:

  • 75% of businesses have some type of debt.
  • 1 in 5 companies said the remaining shareholders would want to buy a deceased shareholder’s shares. Yet it’s not always clear how surviving shareholders would pay for this.

Types of Business Protection

Keyman Insurance

Key person cover protects your business against the loss of a key member of staff.

This could be anyone from a business owner to key management figures. It offers a payout to help provide business continuity in the event that the key employee dies or is diagnosed with a critical illness.

Shareholder Protection Insurance

When a shareholder dies, their shares usually become part of their estate. These shares are then typically transferred to a family member.

This can cause problems for a business.

  • Will the family have the interest and the aptitude for running a company?
  • Will they simply be a sleeping partner, entitled to a slice of the profits without helping out?

To retain control of the business, the remaining shareholders must raise funds to buy back the absent shareholder’s shares.

It’s here Shareholder Protection steps in by providing the funds to buy back the shares of a shareholder who suffers a terminal illness, dies or is diagnosed with a critical illness.

Business Loan Insurance

If you have corporate debt it’s worth considering Business Loan Protection in case someone responsible for repaying it dies or becomes critically ill.

An uninsured business loan runs the risk of your company being declared insolvent after your death if it can’t repay the loan. That’s why lenders and investors such as venture capital firms often expect a business to arrange this cover.

In the event of the death or critical illness of a person responsible for repaying the debt, the policy pays out so you can repay the loan.

Please be aware these business insurance policies are designed for limited companies and partnerships, they are not designed for sole traders.

How much does business protection insurance cost?

The cost depends largely on the amount of cover you need, as well as:

  • The length of cover
  • Whether you add Critical Illness Insurance.

There are other factors which impact the cost of cover which you have less control over, such as:

  • Age
  • Current state of health
  • Smoker status
  • Lifestyle and hazardous activities
  • Family history.

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Personal Protection for Company Directors

Relevant Life Insurance

Your company pays for Relevant Life Insurance, which protects your life as a director / employee by paying a cash lump sum to your family should you pass away.

Given the fact that your company pays for the policy, it’s incredibly tax-efficient. The result is a Life Insurance policy that’s almost 50% cheaper than paying for cover personally.

Executive Income Protection

Directors and business owners don’t tend to get sick pay.

As such, you may want to consider Income Protection for Company Directors. If you become too ill to work, it pays a monthly income equal to a percentage of your gross pre-illness drawings into the business.

You then distribute these funds from the business in a tax-efficient manner in consultation with your accountant to make up for your lost income.

Compare Top UK Business Protection Insurers

When it comes to Business Insurance, it pays to shop around. Below are some of the top insurers in the market you may want to consider:

  • Aegon
  • AIG
  • Aviva
  • Legal & General
  • Liverpool Victoria
  • Royal London
  • Scottish Widows
  • Vitality
  • Zurich

Virtual GP & Other Support Services

The core benefit of any insurance policy is that it provides protection should the worst happen. However, many insurers now include a number of additional benefits with their policies which you can use in your everyday life. Some of the most popular benefits include:

  • 24 / 7 Virtual GP Service
  • Physiotherapy Sessions
  • Counselling & Stress Helpline
  • High street discounts and rewards for healthy living

Get Business Protection Quotes & Expert Advice

Business Protection Insurance is more complicated than personal cover. For example, the way you pay for it is usually different. Also, how HMRC taxes the policy will vary depending on the type of cover and how you set it up.

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