The importance of business protection is often overlooked. It can help businesses continue to trade if an owner or key person within the business dies or becomes critically ill. The policy could help ensure that key people are replaced, the debt of the business is covered or shares from the deceased partner/director’s estate are purchased.
Business owners are quite often focused on the day to day running of the business and don’t always have the time to think about the what if’s.
Who should consider this?
Whether you are a sole trader or a director of a limited company, there is always an event that can happen. You should consider all types of insurance for your business.
Areas of business protection
Key person protection
A key-person is an individual in your business whose skill, knowledge experience, or leadership contributes to the financial success of a business whether that be directly or indirectly. If their death would lead to a loss in profits, loss of important contacts, customers losing confidence in your business, or even the time it takes to recruit and train a replacement, it might be worth thinking about protecting your business against this.
Business loan protection:
In a recent survey carried out by Legal and General, it highlighted that 65% of business owners have some form of business debt. A large proportion of businesses do not have cover in place for this.
Would the loss of a business owner in your company destabilise your business? Ultimately leading to financial difficulties.
With no cover in place, what would happen to the deceased owner’s share? The family may become involved in the day to day running of the company or even sell their share to a competitor.
Share protection allows the remaining partners or directors to remain in control of the business following the death of a business owner. It is designed to provide funds to the surviving owners to be in a position to purchase the deceased owner’s share of the business. This ensures that the surviving owners keep complete control of the business.
A relevant life plan is a term assurance policy taken out by an employer to provide an employee with a lump sum if they die or are diagnosed with a terminal illness. It can be treated as an allowable business expense so the business would qualify for corporation tax relief. There is also no additional tax or National insurance to pay. Like all insurance plans, exclusions and limitations apply so always speak to us to see whether it’s the right path for you.
We’re here to help
If you are unsure whether business protection is right for you or are uncertain whether it will benefit your business, please call us to discuss the options.
Source: Legal and General state of the nation’s SME’s report.