Business Protection

Business Protection

Most companies have a business continuity plan and take out insurance to help protect their assets from loss or damage. However, they can often overlook the need to protect their most valuable assets – their people. Business protection can help to protect your business or family should a director, partner or key employee suffer a critical illness or die.

There are four main areas of business protection;

Key person protection to protect against loss of revenue if a key employee dies or can’t work because they’re critically ill.

Ownership protection (also known as partnership and shareholder protection) to help the other owners keep control of their business and compensate the deceased shareholder’s family for the value of their shares if a shareholder dies or is critically ill.

Loan protection to help repay outstanding financial commitments, such as a commercial loan, director’s loan account or bank overdraft, if the worst should happen to a key person or shareholder.

Relevant Life Cover to provide a lump sum to a director’s or employee’s family in the event of their death whilst employed by the company. Where the director of a business has a family it is likely that they will have some form of personal life insurance in place, the premiums for which they pay for from post-tax income. 

Through a Relevant Life Plan they can provide the same protection with the premiums being paid by the company. The employer payments can be offset against Corporation Tax whilst the employee will not be subject to a P11D benefit in kind making significant tax savings on the premium payable, the level of which being dependent on whether the director is a basic, higher or additional rate taxpayer and whether they are remunerated by salary or dividend. This is because Relevant Life Plans benefit from preferential tax treatment much like ‘Death in Service’ schemes offered to employees by larger employers, however smaller companies generally will not be able to implement a Death in Service scheme as providers are unlikely to cater for fewer than five members. In addition, unlike the benefits from a ‘Death in Service’ scheme, the benefits from a Relevant Life Plan do not impact on lifetime pension allowances, so are ideal for high earning directors who might be facing this problem.

Profusion Wealth Management Limited are Chartered Independent Financial Planners. If you would like to learn more about business protection planning please get in touch.