BUSINESS PROTECTION
Safeguarding your business should something go wrong
PLAN FOR THE UNEXPECTED
Business protection is a way of safeguarding your business should something go wrong. It is an insurance contract that helps business owners plan for the unexpected and provides cover to ensure businesses can continue to trade, with minimal disruption, following the loss of a key employee or a business owner, through death or illness.
Business protection can help in many different ways; it can make sure your business continues to trade, it can provide funds to replace key employees, it can provide employee benefits, it can protect corporate debt, it can ensure business owners maintain control, and it can also be used to ensure the estate of the deceased receives funds for their shares in the business.
The fundamentals of business continuity and succession planning are similar for all businesses. However, the protection needs of each business will vary. The Financial Protection team at SPF is best placed to advise you on and help you find the most appropriate cover to limit the impact should something go wrong.
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Whatever your enquiry, we will endeavour to be of assistance to you. Please feel free to call us or complete our enquiry form below.
BUSINESS
protection
Relevant Life Cover
Relevant Life Cover lets you as an employer provide tax-efficient individual life cover benefits for your employees (including employed directors). It pays a lump-sum, through a discretionary trust, to the employee’s family on death. This type of policy can help your business attract and retain high-calibre staff by offering attractive benefit packages, in a tax-efficient way for your business. It can also be a cost-effective way for you as a director to make provisions for your own family and have your life insurance paid for by the company.
Relevant Life cover is often put in place until the insured life’s anticipated retirement age and can be arranged for any amount (subject to a maximum multiple of their annual remuneration). The reason this type of cover can be cost effective is because the premiums for such cover are not generally treated as P11D benefits.
It is important to note that this information is based on our understanding of current legislation, taxation law and HM Revenue & Customs practice, and can be subject to change. Relevant life plans should not be used for the benefit of the business.
EXECUTIVE INCOME PROTECTION
Executive Income Protection lets you as an employer provide tax-efficient income protection benefits for your employees (including employed directors), helping your business to attract and retain the talent you need to develop and grow. Knowing you are protecting the interests of your most important business asset – your people – will help put your mind, and your employee’s mind at ease.
Executive Income Protection pays a monthly benefit to the company in the event of the employee being unable to work due to illness or injury. The monthly benefit the business receives in the event of a valid claim can be used to help fund the employee’s ongoing sick pay, via PAYE, which will help them during their recovery. It can also be a tax-efficient way for you as an employed director to protect your own income, and have your cover paid for by the company.
As well as helping to protect your employee’s pre-retirement income in the event of illness, executive income protection can also help you insure pensions and National Insurance contributions. This can be crucial if your employee becomes unable to work for a long period of time during their working life, as it is unlikely that they would be able to continue building up their income for retirement in such an eventuality.
The reason this type of over can be cost effective is because the premiums for such cover are not generally treated as P11D benefits. It is important to note that this information is based on our understanding of current legislation, taxation law and HM Revenue & Customs practice and can be subject to change. Executive Income Protection plans should not be used for the benefit of the business.
BUSINESS LOAN PROTECTION
Many businesses borrow funds to invest into their business or even to aid cashflow and help meet ongoing costs, but could your business manage the repayments if a key employee were to sadly pass away or were diagnosed with a critical illness? Financial institutions will often lend money to a business based on one or two key people remaining part of it. If something happens to these key people, the financial institution might then expect the business to repay the loan immediately. Business Loan Protection could give your business a financial lifeline in such an eventuality.
A key employee is any member of staff who has a direct impact on your business’s profitability. A person may be key to your business if, for example, they have valuable sales contacts, are key salespeople whom contribute to a significant amount of your profit, are the main driving force of the business, are heavily involved in the development on a new product… there are many ways someone could be considered a key person.
Business Loan Protection can help your business pay an outstanding overdraft, loan or commercial mortgage, should the key person die or be diagnosed with a critical illness. The cover amount should reflect the amount your business owes in borrowed money. This can ensure that in the event of claim, you have sufficient cover in place to repay your business loans. There can be serious implications for businesses that are unable to pay back loans, so Business Loan Protection can help to give your people and shareholders some peace of mind and could give your business greater confidence in planning its financial future.
SHAREHOLDER PROTECTION
Shareholder Protection should be a crucial part of your continuity and succession planning for your business. Business succession planning is one of the biggest issues you could face as a shareholder of a limited company, and it is important that you sit down with your fellow shareholders and discuss what you would like to happen to your shares and of course the management of the company if anything happened to one of you. The sudden loss of a key shareholder can disrupt a company, but shareholder protection can minimise the impact to the business.
For example, if a shareholder dies unexpectedly and their interest passes onto their family, without the funds or legal agreements in place to buy said interest, your business could be at risk. The remaining shareholders might not want a third party acquiring the shares, especially if the deceased was a majority shareholder, as they would effectively take control of the business. Similarly, if a shareholder were to die, their family might simply prefer to receive the market value of their share in cash, and not have anything more to do with the business. The family could even decide to sell their interest to a competitor.
You need to consider whether the surviving shareholder(s) can afford to buy the share of business from the family of the deceased? Business succession planning, together with a business protection arrangement to provide suitable funds, allows the remaining shareholders to keep control of the company, whilst helping to make sure that the deceased shareholder’s family receive the value of their business interest. If you or your fellow shareholders are in any doubt, a review of the company’s articles of association will highlight the need for protection.
KEY PERSON COVER
Every successful business is made up of talented, dedicated, and potentially irreplaceable people. It is never nice to have to think about worst case scenarios, but a key person insurance policy helps safeguard your business against the financial impact that a death or illness of your key people could have. In such an eventually, the proceeds on this type of policy could significantly help your business recover and ensure you can continue trading.
A key person is someone whose death or prolonged illness would have a serious effect on your company’s future turnover and profits. A person may be key to your business if, for example, they have valuable sales contacts, are key salespeople whom contribute to a significant amount of your profit, are the main driving force of the business, are heavily involved in the development on a new product… there are many ways someone could be considered a key person.
The proceeds from the policy are paid directly to your business and could help replace the key individual, help cover any lost revenue, cover outstanding loans, cover the impact it could have in consumer confidence or loss of goodwill. This type of policy can also provide your investors, should you have any, the confidence that your business can survive and thrive even in the event of losing a key person through death or illness.