What Type of Business are you?
Sole Trader
Partnership
Limited Liability Partnership
Limited
“Whatever the legal structure you have adopted for your company our specialist business protection advisers will offer advice & guidance while keeping everything simple”
Important factors to consider
Cash Flow
Confidence
Control
Contacts
What are the four functions in any business
Leadership
Financial Control
Production
Sales
Products to Mitigate Business Disruption
Key Person Cover
Otherwise known as profit protection. Any employee can be covered and provides money to the business in the event of death or illness.
Considerations:
Size of the business & years trading
Recruiting and training a replacement
Loss of confidence in the business
Effect on sales & new contracts
Pressure on employees covering the role
Dependant on the amount of cover we use certain recognised formulas to calculate this
“Every business insures its tangible assets but your people are pivotal to the success of it”
You can insure them in the event of being absent from the business. This will either provide a lump sum of money in the event of death or critical illness, or you can also get a monthly income to the company if they are signed off work by a medical professional. Premiums are paid by the business and proceeds are paid into it.
70% WOULD CEASE TRADING IN LESS THAN 2 YEARS WITH THE LOSS OF A KEY PERSON
60% OF BUSINESSES SAID THEY HAD 3 OR MORE KEY PEOPLE
30% OF BUSINESS CONTINUITY PLANS COVER THE HEALTH AND LIVES OF THEIR KEY PEOPLE
(2021 L&G State of the Nation's SMEs)
Business Debt
If your business borrows money then you can insure the debt against death or critical illness of a shareholder, partner, or key person.
Commercial loans can have a recall mechanism which means the lender can demand the repayment at short notice
Different Types of debt you can cover:
Overdrafts & Credit Facilities
Commercial Mortgages & Loans
Director Loan Accounts
Venture Capital
Personal Guarantees
75% OF BUSINESSES HAVE SOME FORM OF BUSINESS DEBT
£200,000 WAS THE AVERAGE BORROWING
54% HAVE GIVEN PERSONAL SECURITY FOR THE BUSINESS BORROWING
(2021 L&G State of the Nation's SMEs)
Ownership
“Provides money to the business or the estate which allows the remaining owners to regain control in the event of a death or critical illness. An option agreement is effected and is the instrument which allows Business Property Relief (BPR) to potentially occur.”
Company Share Purchase
The most tax efficient way of setting up cover as the business pays the premium. Money is paid into the company and the exiting party’s shares are cancelled.
This method of set up needs special care because there could be issues in the event of a claim.
Partnership or Limited Liability Partnership (LLP)
The partnership agreement dictates what happens upon the exit of a partner. If there isn’t one, then it defaults to the Partnership Act 1890. This states the partnership needs to be dissolved immediately, their estate needs to be compensated.
Own Life in a Business Trust
This offers 100% certainty that any pay out will go to the right people in the event of a claim.
The business can pay the premium, but it’s classed as further renumeration to the shareholder.
This method of set up is the preferred arrangement for most companies.
Dependant on where the business is based should be considered because the legal positions are different in Scotland as opposed to England & Wales.
Relevant Life
“Let the tax man pay some of your life insurance premium”
Provides a tax-free lump sum in the event of death or terminal illness to the individuals nominated in the discretionary trust. This is set up prior to the cover starting and needs careful consideration as to who these people are. This is because they must decide where the proceeds go.
As such any money paid is potentially free of tax and legal delays.
Benefits
Any employee is eligible
Company funded
Obtain tax relief on the premiums
Not treated as a benefit in kind
Fully portable
Cover up to the age of 75
Sits outside of your estate
Executive Income Protection
Provides a monthly income to the business if the insured is signed off work due to injury or illness.
Additional Benefits:
Cover pension contributions
Spousal dividend coverage
Employers NI covered
Possible to claim tax relief in certain situations
Not treated as a benefit in kind
Paid to the company
This policy would pay the monthly benefit to the business in the event of a valid claim, the business can then use this benefit to fund the employee’s ongoing sick pay if they are unable to work because of becoming incapacitated due to illness or injury.
This can help the employee to meet their financial commitments whilst not leaving them to rely solely on their savings or state benefits.
Business Private Medical
Every insurer has different options within this type of cover. We will help you to identify which benefits are right for your people.
They will be able to get quick medical treatment in a private facility which they can choose in most circumstances. It’s designed for acute conditions. Thus, getting your employees back to work sooner and reducing the amount of time they miss off work.
Additional Benefits:
Avoid waiting lists
Swift diagnostic tests
All consultancy fees paid for
Specialist drugs and treatment
Hospital cleanliness
All inpatient treatment covered