Business Protection Insurance In Brief
Business protection insurance covers many categories of insurance products. Each is designed to protect the longevity of your company and can insure against circumstances such as losing an important member of staff, or the illness or death of the business owner.
This type of planning is essential to succession planning, particularly for small businesses that are often reliant on one owner.
How Does Business Protection Insurance Work?
Business protection aims to ensure that your business can keep trading, no matter what may happen. One of the most significant events that could cause a small business to close is the loss of an important member of the team – an employee, director, or owner.
This includes what would happen in the event of their death, or a serious illness or injury that rendered them unable to work.
Business protection does not have to apply to one person and can be relevant to any number of key positions. Usually, the pay out against a claim is paid to the business or business owners.
Insurance can be taken out by any type of company, including:
- Limited Companies
- Sole traders
What Are The Different Types of Business Protection Insurance?
The main types of business protection are:
- Business loan insurance
- Key personnel insurance
- Shareholder protection insurance
- Relevant life insurance
Business Loan Insurance
This type of cover is a type of life insurance, which insures the business against repaying any loans or borrowing should the owner of the business die. There is also the option of adding critical illness to the cover or combining the two as a package.
The protection applies to the guarantor of the lending, which is usually the owner of the business. It can also cover directors, partners or shareholders who have acted as a guarantor for business lending.
If business loan insurance is claimed against, then the insurance pay out will assist with paying off outstanding debts, and avoid any personal guarantees being called in against remaining guarantors.
Key Personnel Insurance
Key person cover is another type of business life insurance, and helps businesses to cope financially should a core member of staff die.
This can include any employee who is essential to the businesses such as:
- Finance Managers
- Sales representations
- Managerial staff
The insurance pay out in this scenario is used to find and recruit a replacement, or to cover lost income as a result of losing a key member of staff.
Shareholder protection insures the life of the owners or shareholders of a business, and if they die will provide a pay out to the remaining owners.
These funds can be used to purchase the shares from the estate of the deceased shareholder, to ensure that the business can continue to trade with the remaining owners in possession of their proportion of shares.
Relevant Life Insurance
This type of business life insurance covers the employees of small businesses and can be purchased privately by company directors provided they are paid via PAYE.
Relevant life insurance is a type of benefit offered by some employers, whereby the family of the insured person receives a pay out in the event of their death.
Business Protection Insurance FAQs
Which Business Protection Insurance Is Right For My Company?
There are lots of factors to choosing the right business protection, including:
- The type and structure of your business
- Share ownership and distribution of voting rights
- Your industry and work environment
- How large your company is, and how many people it employs
If you need help establishing which type of insurance will help secure the long-term stability of your company, get in touch with Revolution Finance Brokers.
We work with companies large and small to provide tailored insurance to protect future growth.
Who Needs Business Protection Insurance?
Many businesses choose to take out insurance since they have a business loan or trade from mortgaged premises. The cover in place will ensure that, should you or another partner or owner pass away, that the lending would be covered by the insured pay out.
Whilst not mandatory, some business lenders do require some form of insurance to be in place before being able to make a lending offer.
Is Business Protection Insurance Taxable?
Particularly for key person insurance, cover designed to protect the future repayment of company debt can vary in tax treatment, so it is essential to seek independent advice to work out which options are most financially secure for your business.
What Other Life Insurance Benefits Can Employers Offer?
As well as relevant life cover, larger firms with more employees can consider offering insurances for death in service. Both options provide a pay out to the family of an employee should they pass away.
Life insurance is often an attractive benefit alongside remuneration, and provides tax relief for the company against national insurance payments, making a saving whilst providing an extra perk to their employees.