The most valuable asset to any business is its people.
The importance of business protection can often be overlooked. Its purpose is to help business owners plan for the unexpected by providing cover to ensure the business can continue to trade with minimum disruptions following the loss of a key employee or one of the business owners through death, critical illness or illness/injury.
Business protection is available for Limited Companies, partnerships, sole traders and key employees. It can also be used to ensure repayment of a business loan in the event of death or critical illness of a business owner. At Financial Resolutions Mortgage Brokers we can guide you through the options available to you and your company.
Key Person Cover
Losing a key person can be disastrous for the long-term survival of a business. A key person can best be described as any member of staff who has a direct impact of the business’s profits. This could include any business owners, directors, or employees with specialist skills that keep the company trading.
Relevant Life Cover
Relevant Life Cover is a tax efficient life cover policy. It enables a company to offer death in service benefits to its employees (including Directors who receive a salary).
Shareholder protection (as well as Partnership protection) is designed to provide the owners of a business with a lump sum to buy the affected individuals share of the business, in the event of them dying prematurely or being diagnosed with a critical illness.
Business Loan Protection
Many businesses will take out a loan to start up a company or to expand their operation. The ability to repay this loan will rest with the owners of the business.
KEY PERSON COVER
Losing a key person can be disastrous for the long-term survival of a business.
A key person can best be described as any member of staff who has a direct impact of the business’s profits. This could include any business owners, directors, or employees with specialist skills that keep the company trading.
Key Person cover is effectively life cover taken out by the business to protect the firm against the loss of this key person. Critical illness can also be included within these policies.
The plans are owned by the company and any benefit is paid directly to the firm in the event of a claim. The amount a business covers a key person for depends on the individual circumstances of that company. It can be calculated as multiple of firm’s profits, to protect the business profit during a period of change.
In most instances it is assessed as a multiple of salary, designed to help cover a replacement or assist with the recruitment of a new member of staff. It is important to know that Key Person cover is not designed to protect the ownership of a firm as with shareholder protection, but the essential staff members within it.
At Financial Resolutions Mortgage Brokers, we can identify the right type of cover to suit you and your business.
In the event of a death, the surviving shareholders will need enough money to purchase the deceased business owners’ shares. To calculate this, consideration is given to;
- Company assets such a property, vehicles, any specialist equipment purchased
- Net profit from the last three years of trading
- Likely projection of earnings for the firm
- The size of the shareholding owned by the deceased.
It is vital that an ‘Accountant’s valuation’ of the company is obtained when arranging this type of policy, factoring in the above considerations. With our help and guidance, applying for Shareholder protection can be a simple straight forward process.
Shareholder protection is designed to provide the owners of a business with a lump sum to buy out a deceased, or critically ill persons share of the firm.
It provides a safety net to enable the remaining owners to keep control of their company. It also ensures the deceased family’s estate receive a fair settlement for their inherited share of the firm.
With either Shareholder Protection or Partnership Protection, each partner within the firm takes out a life insurance policy for the benefits of their fellow shareholders.
RELEVANT LIFE COVER
Relevant Life Cover is a tax efficient life cover policy.
It enables a company to offer death in service benefits to its employees (including Directors who receive a salary).
The policy is set up by the company, with the premiums paid for by the firm, which pays out a lump sum upon death (or a terminal illness diagnosis) of the ensured employee. Unlike other business protection plan, this benefit is paid to the employees’ family or financial dependents and is not retained within the company.
Often, small businesses do not have enough employees to be able to offer a group life scheme. Relevant life insurance can be arranged on an individual life basis, which means small business owners can take advantage of tax efficiencies usually enjoyed by larger firms.
For the employer, no national insurance contributions are applicable and corporation tax relief is available on the premiums. For the employee, the benefits are free of income tax, capital gains tax and national insurance.
The policy is placed in a relevant life trust, which ensures any pay-out is made to the employees chosen beneficiaries in the event of death.
As a whole of market insurance broker, we have access to all the major UK based insurers, to help you find the best policy to suit your employee’s life cover requirements.
BUSINESS LOAN PROTECTION
Many businesses will take out a loan to start up a company or to expand their operation.
The ability to repay this loan will rest with the owners of the business.
The purpose of Business Loan Protection is to ensure any outstanding borrowing such as a loan, commercial mortgage, or a director’s loan, can be repaid should one of the business owners die or suffer a critical illness.
Business Loan Protection is similar to personal life cover taken out to protect a mortgage on your home, in that is designed to clear a debt should the unthinkable happen.
When a claim is made the sum insured is paid either to the business directly, for the remaining shareholders to clear the outstanding loans, or it can be paid directly to the lender if the cover has been assigned to them.
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