A guide to Business Protection Solutions

Key person insurance acts like a safety net for a business. It's a type of insurance policy a business takes out on the life, health, or disability of an essential employee – often the owner, a top executive, or someone with unique skills. These key people are vital to the company's success, and their absence could cause significant financial hardship.

The business pays the premiums for the insurance policy on the key person. If that person dies, becomes critically ill, or suffers a disability, the insurance company pays out a lump sum of money. This financial cushion helps the business cope with the disruption caused by the key person's absence. The funds can be used for various purposes, such as:

• hiring and training a replacement
• covering lost profits during the transition period
• meeting financial obligations like loan repayments
• maintaining investor confidence.

Key person insurance provides peace of mind for business owners and helps ensure the company's stability even in the face of unforeseen events. It's a crucial tool for mitigating risk and safeguarding the future of your business.

Relevant life insurance is a tax-efficient way for employers to provide death-in-service benefits for valued employees. Unlike traditional group life insurance plans, relevant life offers more flexibility and caters to smaller businesses.

The employer takes out the policy on the life of a specific employee, such as a key person or a high earner. This means the policy is ‘written on the life of another,’ with the employee's consent of course. The employer pays the premiums, and upon the employee's death or terminal illness, during their employment, a tax-free lump sum is paid directly to the employee's beneficiaries (usually family members).

There are significant advantages for businesses opting for relevant life insurance. 

• Cost-effective: Premiums are often lower compared to group life plans, especially for smaller companies with just a few key employees. 
• Tax-efficiency: Premiums paid by the employer are typically tax-deductible as a business expense. Additionally, the death benefit payout is tax-free for the employee's beneficiaries. 
• Tailored coverage: The level of cover can be customized for each employee based on their salary or importance to the company. 
• Attracting talent: Offering relevant life insurance can be a valuable perk for attracting and retaining top talent, especially for high earners who might have limited life insurance options due to pension contributions.

By providing financial security to the employee's family and a financial buffer for the business during a difficult time, relevant life insurance offers a win-win situation for both employers and employees.

Shareholder protection insurance steps in to safeguard your business in case of life's uncertainties. It's a type of business insurance that ensures the company's stability even if a shareholder dies, becomes critically ill, or suffers a permanent disability.

Each shareholder takes out a life insurance policy on the others, often written under a business trust. The business pays the premiums on these policies. If a shareholder encounters a covered event, the insurance pays out a lump sum. This money is used to purchase the deceased or disabled shareholder's shares from their estate or beneficiaries at a predetermined price.

This provides several benefits.

• Maintains control: The remaining shareholders can buy back the shares and retain ownership of the company. This prevents unwanted outsiders from acquiring a stake in the business
• Financial stability: The insurance payout avoids the need for the remaining shareholders to dip into personal savings or take out loans to buy back the shares.
• Succession planning: It facilitates a smooth ownership transition during a difficult time. The predetermined share price eliminates disputes between the remaining shareholders and the deceased's beneficiaries.
• Peace of mind: Knowing the business will continue operating smoothly provides peace of mind for all shareholders and their families, especially when facing a life-altering event.

Shareholder protection insurance is a valuable tool for businesses with multiple owners, particularly those where each shareholder brings a unique skillset or plays a critical role in the company's success. It safeguards the company's future and the financial well-being of all involved.

Business loans are a lifeline for many companies, but they also come with a burden of repayment. Business loan protection insurance acts as a safety net, ensuring your business can keep afloat even if a key person dies, becomes critically ill, or suffers a disability.

Imagine you take out a loan to purchase vital equipment for your business. Business loan protection insurance allows you to insure this loan. The business pays the premiums for the policy, and you choose the level of coverage to match the outstanding loan amount. If a critical event impacts a key person insured under the policy, the insurance company pays out a lump sum.

This payout provides several advantages.

• Loan repayment: The insurance money can be used to repay all or a portion of the outstanding business loan. This prevents the company from defaulting or facing financial strain due to the loss of a key employee.
• Continued operations: By ensuring loan repayments, Business loan protection insurance helps the business maintain its financial stability and continue operating without disruption. This is crucial during a challenging period when the loss of a key person can significantly impact day-to-day activities.
• Flexibility: Business loan protection insurance can be tailored to cover various scenarios. You can choose between level cover, which remains constant throughout the loan term, or decreasing cover, which reduces as you pay down the loan. This ensures you're not overpaying for insurance as the loan amount decreases.

Business loan protection insurance offers peace of mind for business owners and reduces the risk associated with business loans. It safeguards the company's financial health and ensures loan repayments even in the face of unforeseen circumstances.

If you would like to review the options available for your business protection, then please speak with your financial advisor or contact one of our Financial Planning Consultants who will be delighted to discuss your options with you.