Insurance to protect business interests is available for a variety of different situations that can affect business owners and business continuity.
Key Person Cover
If an important member of staff is taken seriously ill or dies the effects on a business can be severe with a potential loss of sales and a reduction of income and cash flow. There may also be costs involved in finding or training a replacement.
Cover can be taken out by a business on the life of a ‘key person’ to protect against death or the diagnosis of a serious illness (from a defined list of illnesses) or long term absence from work due to illness or injury.
The business owns the policy and receives the benefit in the event of a claim.
There may be tax implications to consider and more than one way to calculate the amount of cover needed so we recommend discussing your needs in more detail with one of our advisers.
Shareholder Protection allows the remaining directors of a company to remain in control of the business following the death of a major shareholder.
If no protection is in place a deceased shareholders holding may be passed to their family and the surviving business owners could lose control of the business. The family may choose to become involved in the business or even sell the shares to a competitor.
A shareholder protection policy could pay out a lump sum to help purchase the deceased shareholders interest in the business.
The impact of the death of a partner can have devastating affects on the business. If there is a partnership agreement in place the deceased share would go to their estate. If there is no agreement in place the partnership would be dissolved and the deceased family will be entitled to their share.
Partnership protection sets up agreements stating how the business should be valued and how business interests should be dealt with by the deceased’s family and the remaining partners. It also provides the funds to allow the remaining partners to purchase the business interest from the deceased’s family.
A careful valuation of the business needs to take place which should be reviewed on a regular basis as the value of the business changes.
Relevant Life Cover
Suitable for small business that do not qualify for a group protection policy and can be used to provide a Death in Service benefit to an employee of a business, including a director of a limited company.
Premiums are paid by the employer (the company) and the policy is placed in trust for the benefit of the employee.
Provided that the local inspector of taxes accepts that payment of the premiums has been incurred ‘wholly and exclusively for the purpose of trade’, the employer may be able to claim corporation tax relief on the premium.
There are potential tax implications of business cover that need to be considered and many pitfalls to avoid.
Contact us for a business evaluation and personal protection recommendation.