Insurances for Business

What are the options for business insurance? Do I really need it?

If you run a business – what would happen if you, your business partner or one of your key employees fell critically ill? Or worse, they passed away suddenly?

It’s the most difficult, emotional time. But you and your family rely on your business for your income. Your team & customers rely on you too. So what would you do?

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Business protection is all about continuity. To help ensure that:

  • Key people in your business can be replaced;
  • Corporate debt is protected;
  • And that shares from the deceased partners’ or director’s estate are purchased.

Why insure your business?

We get it! Insuring your business might feel like an unnecessary expense; too complicated or simply not believing that the worst could ever really happen. But let’s be honest, it can. And if it does, the right protection can determine your entire business future.

Protecting your business means:

  • Peace of mind. Your business is financially secure if something critical happens.
  • It takes the pressure off a business owner or Director – so should they fall seriously ill, they don’t feel any stress about having to return to work quickly (which makes SUCH a difference during the most difficult times).
  • Protection of shares in the business for a Partner or Director. Your business is protected should they fall critically ill or die.
  • And it maintains your hard-earned reputation, when your business has an effective disaster recovery strategy in place.

 

How is business protection different to personal protection?

It’s done exactly the same way! The main differences are that:

  • Business protection usually deals with higher sums assured;
  • And the claim is paid to the business, rather than the family member.

Legal and General and Bright Grey are two of a few companies who offer a wide selection of business protection and explain the details very succinctly.

 

What are the options for business protection?

Let’s look at each of these core areas in more detail:

  1. Key Person Protection
  2. Partner / Director / Limited Liability Partnership Share protection
  3. Business Loan Protection
  4. And Income Cover for Sickness.

With business protection, you can choose life cover or critical illness separately, or mix and match a flexible menu of products to cover different scenarios and costs. If you run a small business, products can be tailored to your budget (always better to be covered a little than not at all!).

  1. What is Key Person Protection?

Key Person Protection helps protect your business from the financial impact of key person

falling critically ill, terminally ill or dying during the term of your policy.

A key person is someone in your business whose role affects the overall profits of your business and whose knowledge, skills and / or leadership are crucial to the success of the business. For example:

  • Managing Director
  • Sales Director
  • Head of Product Development
  • IT specialist
  • Head Technician.

Losing a key person dramatically impacts your business – from reduced sales and loss of profit, to recruitment costs, disruption of innovation and increased workload for the remaining staff.

If this key person has made a loan to the business as a partner or director, and then suddenly passed away, the loan would need to be re-paid.

 

What exactly does Key Person Protection give you?  

It’d a life insurance or life insurance with critical illness plan, covering a key person. The business owns the plan, pays the premiums and any monies are then paid directly to the business.

This cover ensures that any loans are paid, staff can be trained to step into the key person’s shoes or recruitment can be funded to find a suitable replacement.

 

Would my business qualify?

Key Person Protection applies to Limited Companies and Limited Liability Partnerships. An ordinary Partnership plan is written on an own life basis (rather than a business insurance) and can be placed in trust for the benefit of the other business partners.

  1. What is Partner / Director / Limited Liability Partnership Share protection?

Any business can get into financial difficulties if they lose one of their business owners.

This protection plan ensures that the remaining partners can stay in control of the business.

It works by paying out a sum of money to the remaining partners, that would cover the purchase of that particular share of the business.

  1. What is Business Loan protection?

Do you have a business loan, outstanding overdraft or commercial mortgage – with a guarantor?

If so, it goes without saying that the loss of that guarantor could have a huge financial impact on your business.

For example, some Directors may have guaranteed business loans using their own home as security. So it’s crucial to ensure that any dependents are protected.

If a Director has made a loan to the business and passed away, the loan will need to be repaid to the estate of that deceased person.

Business Loan Protection works by creating life assurance written on the life of the guarantor. So  when the worst happens and you make a claim, the monies paid out will enable you to pay off any outstanding debt to either the business or a lender.

  1. What is Income Cover for Sickness?

What would happen if you or one of your key employees fell critically ill – or worse, they passed away suddenly?

If you’re self-employed (and especially if you don’t have a team), not being able to work for a long time could be disastrous for your business and your finances. You may even have to close the business, taking all your savings (if you have any).

Income protection is one way of making sure you have money coming in to pay the bills & look after your family, while you get back on your feet. If you’re a Limited Company, this can be paid via the company - or straight into your personal account, if you are a Sole Trader.

It’s generally called Income Protection cover by most insurance companies & is essentially the same as individual income protection.

As a business owner, Income Protection pays out a monthly income if you or your employee is unable to work because of an illness or injury that leaves them unable to carry out everyday tasks that meet the insurance company’s definition of incapacitated. It usually covers between 50% and 70% of your pre-tax earnings.

Business Income Protection cover usually starts straightaway, so you’ll will receive payments immediately. Or can choose for it to ‘kick in’ after a particular time frame, in line with your savings.

The monthly payments will continue until you or your employee:

  • Recover and return to work;
  • No longer meet the definition of incapacitated;
  • Pass away;
  • Or until the either insurance policy ends; or the payment period stated in the policy ends.

You can choose payment periods of 1 year, 2 years or Whole of Term, which is right up until retirement age.

Some of the insurance companies have additional products too, giving you or your employee support to help cope with treatment & rehabilitation.

It is never too late to invest in protecting your business income. We know how tempting it is, to think it could never happen to you – but if it DOES, you have financial peace of mind while you or your employee recovers. And it could be the difference between your business closing or continuing into the future, for many years to come.

 

Take the Next Step Now

We’d love to talk about the right solution to help protect YOUR business.

Just leave your name & number now, and one of our team will be in touch to talk everything through!

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And finally – Trusts…

Apart from Key Person Protection, all of the business insurance policies we’ve talked about above can be set up in Trust.

Our expert advisors can help you understand how Trusts work and explore the right solution for your business & personal circumstances.

Putting the policies into Trust means:

When you claim, payments are made more quickly. You avoid any delays with their representatives having to obtain a Grant of Representation before they can deal with the policy, which can take several months.

Proceeds may not be subject to Inheritance Tax. This is payable on any part of an estate worth over £325,000 at 40% (2011/2012). However, if you put the policy into trust, you can then gift some or all of the benefits of the plan to other people. They would then no longer be part of the policy holder’s estate and not subject to inheritance tax on death – although Trusts can be subject Inheritance Tax through Periodic charges and Exit charges.

 

Take the Next Step Now

We’d love to talk about the right solution to help protect YOUR business.

Just leave your name & number now, and one of our team will be in touch to talk everything through!