Business Protection

Every business needs to protect itself. For most businesses the most valuable asset it has is its people. Without them, a company’s survival could be at serious risk.

Introduction to business protection

With that in mind we can help you take the right steps to protect your people and your business. After all, you already protect many of the important things that keep your business running smoothly, like property, fleets and stock. So you should also insure your most valuable assets: your staff and shareholders.

Key Person

IF PREMIUMS ARE NOT MAINTAINED, THEN COVER WILL LAPSE.

THE POLICY MAY NOT COVER ALL THE DEFINITIONS OF A CRITICAL ILLNESS. FOR DEFINITIONS PLEASE REFER TO THE KEY FEATURES AND POLICY DOCUMENT. 

Key Person Insurance

Directors and employees with highly specialist skills or knowledge are key employees of the companies they work for. To lose one as a result of a critical illness or death can be damaging to the business. That is why taking out Key Person insurance to protect the company is a wise move.

Key Person insurances can provide several benefits. These can include:

  1. Paying the costs of a temporary replacement
  2. Meeting the costs of recruiting a permanent replacement
  3. Covering the cost of death or incapacity of a key member of staff.

The full scope of cover will depend on the type of policy purchased but companies ignore the risks of losing key staff at their peril. Shareholders, bank managers, suppliers and customers may not be so laid back.

Share protection

THE PLAN WILL HAVE NO CASH IN VALUE AT ANY TIME AND WILL CEASE AT THE END OF THE TERM. IF PREMIUMS ARE NOT MAINTAINED, THEN COVER WILL LAPSE.

Share protection through life assurance

Directors’ or partners’ share agreements may provide for the remaining directors to purchase the shares of other shareholding directors should they die. However there is a risk that the remaining directors may not have sufficient funds to hand when a fellow director passes away unexpectedly.

One solution to this is to take out life cover as a source of funding.

To arrange such cover requires the understanding and agreement of all concerned. It will also require some careful calculations to determine how much cover is required.

However, it will be a comfort to all directors or partners of a business to know that their own or a colleague’s death will leave the other directors with sufficient support to carry out the terms of their shareholders’ agreement.

This type of policy can also include critical illness for protection in the event that a director or partner is forced to leave due to illness.

Income protection

THE PLAN WILL HAVE NO CASH IN VALUE AT ANY TIME AND WILL CEASE AT THE END OF THE TERM. IF PREMIUMS ARE NOT MAINTAINED, THEN COVER WILL LAPSE.

Income protection insurance

If you’re unable to work because of illness or injury, under an employers group sickness scheme (Group IPI) salary is continued but is subject to tax and NI in the usual way.

The maximum amount of income you can replace through insurance is broadly the after-tax earnings you have lost, less an adjustment for state benefits you can claim. As with all insurance, it is important that you have the right type of policy which provides all that you need it to do for you.

Long-term income repayment policies usually come into play between the time when your employer stops paying sick pay, and when you collect your pension.

Shorter-term policies tend to be used to protect a mortgage, bank loan or other payment. These usually commence within a few weeks but stop entirely after 12 months or 24 months. Short-term policies often include unemployment and redundancy, unlike longer-term income protection cover which does not.

Income Protection Insurance only applies to products which pay you an income if you become unable to work due to sickness or injury. Policies to protect mortgages, loans or credit card debts are often called Accident Sickness Unemployment (ASU) policies.

We will happily explain this in more detail to you.

THERE ARE OTHER PROVIDERS OF PAYMENT PROTECTION INSURANCE [Short-Term Income Protection] AND OTHER PRODUCTS DESIGNED TO PROTECT YOU AGAINST LOSS OF INCOME. FOR IMPARTIAL INFORMATION ABOUT INSURANCE, PLEASE VISIT THE WEBSITE AT www.moneyadviceservice.org.uk.

Relevant life cover

A relevant life insurance policy enables employers to provide individual death-in-service benefits for their UK-resident employees who are aged 17 – 71 when the policy is established. The policy, which is applied for and paid for by the employer, pays out a tax-free lump sum if the insured employee dies — or is diagnosed with a terminal illness — whilst in the service of the employer.

Relevant life plans are however available only where an employer-to-employee relationship exists — i.e. employees of a limited company. For that reason, relevant life insurance is not available to sole traders, a partnership’s equity partners or equity members of a Limited Liability Partnership.

Employees can use a relevant life policy to provide their own individual ‘death in service’ benefits in addition to those offered by their employer’s group life insurance scheme if such a scheme exists. The premiums paid to a relevant life policy and the benefits paid out, are not included in the employee’s annual or lifetime pension allowances. (Relevant life is a term insurance, so the policy has no surrender value.)

Amount of cover

The policy’s sum assured is based on a multiple of the employee’s total remuneration, which includes his or her salary and any dividends and/or bonuses they may be paid. There is no statutory limit on the amount of cover, Depending on the age of the employee, and the insurance provider’s terms and conditions, the multiple could be as much as 10 to 25 times remuneration.

Tax benefits

Employer: Providing Her Majesty’s Revenue & Customs agrees that the premiums paid are wholly and exclusively for the purposes of the business, the employer is entitled to corporation tax relief on the payments. Furthermore, there are no National Insurance contributions to pay on the policy payments.

Employee: There are no National Insurance contributions to pay on the policy payments and as the payments are not treated as a benefit in kind, they are not subject to income tax. On the death of the insured person, the tax free lump sum will not form part of the deceased employee’s estate and will not be subject to inheritance tax.

TAX TREATMENT DEPENDS ON INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE

Trust

To ensure the proceeds go directly to the employee’s family or financial dependents, we will normally recommend that the policy is written in an appropriate trust.

Portability

If the policy is portable, the employee can take it with them should they move to a new employer, although a new trust would need to be set up in that circumstance. The employee can either assume responsibility for making the policy payments, or ask their new employer to pay the premiums as part of a benefits package.