Business Protection Life Insurance - What is it all about ?

You have probably insured your Stock, Building Premises, Vehicles & also have Public Liability etc.
Yes, they may all be important Assets but what about the People who work there - your Key Personnel ? 

"Men & Women, not Machines, are the real source of Profits of any Business"
 Andrew Carnegie 1835-1919

Business Protection Life Insurances - Summary

• Key Person Life Insurance Protection
• Partnership Life Insurance
• Relevant Life Policy
• Shareholder Protection
• Executive [PHI] Income Protection
• Keyperson [PHI] Income Protection
• Small Business Life Insurance
• Company Life Insurance
• Executive Life Insurance
• Group Income Protection
• Group Life Insurance Company Cover
• Employee Life Insurance Cover
• Keyman Life Insurance
• Group Life Assurance - Critical Illness
• Business Loan Insurance
• Double Option Agreements, Buy & Sell Agreements, Business Trusts maybe needed
• Medical evidence may be required and a medical examination for those with health issues  

> What if a Key Director or Executive were to die or be critically ill ? How would your business survive?
> What if you are in partnership & your Business Partner was to die or become seriously ill and was unable to work?
Would your Business survive? Your Business Bank or Shareholders will be concerned about the future of your business?

Key personnel are someone who brings money into the business, it may be someone who has specialist skills or knowledge or it may be someone on whom the business depends for loan finance. Examples of a key person could be: Sales Managers, Company Directors or say Technical IT Specialists.

So to make sure you get the correct Advice means the Adviser assesses what your Business may need, and compares recommended Life Assurance Companies for the Business protection cover that suits your needs best. Always answer questions as best you can and disclose any existing medical conditions when asked. If you don't give the full facts, you could invalidate your Insurance Policy and the Insurance company won't pay out.

Tax Relief on Premiums ...Is that a Relevant Business Life Insurance Policy ?

A Relevant Life Policy is a single life death in service (DIS) plan paid for by the employer on the life of an employee [ this can include directors paying tax under PAYE ]. Unlike some group DIS schemes there is no minimum number of members, making this ideal for small businesses. Relevant Life Policies also do not count towards an Individual's annual or lifetime allowance.

Subject to the "wholly & exclusively rules" Relevant Life Insurance plans are an allowable deduction for business against corporation tax, but they are not treated as a benefit in kind. This results in no NI liability for employer or employee plus no income tax liability for the employee on the payments into or any sum assured paid out under this tax efficient plan.

Example: XYZ Ltd takes out a relevant life cover policy for £200pm on Mr Jones providing lifecover for his loved ones. They pay no income tax, or NI on this £200pm but can claim 20% corporation tax as an allowable deduction of £40pm = net cost £160pm. 

KEY PERSON INSURANCE COVER

Keyman Insurance [otherwise known as Key Person Insurance, Key Man Insurance, Key Personnel Insurance policies] is an insurance designed to help compensate a business for the financial loss on the death, long term sickness or serious critical illness for example; cancer, heart attack, stroke, diabetes - of a key person. On any events as just specified, a lump sum or income may become payable to the business to use to compensate for the loss of that key person. Other factors -

What should I consider insuring the Key Person for?
Consider the following are issues:-

* The cost of training or recruiting replacement staff.
* The effect on profitability if the key person were to die or become ill or disabled.
* Business Finance that could be recalled on the key person's death or disability.

What else should be considered in working out Key Man Insurance ? 

* Proportion of Business Profits - Take into account the keyperson's salary, annual profit or the time it could take to replace them.
* Multiple of Income - The key person income is multiplied by a factor, normally say 5 x 10 but dependant upon their age. 
* Term - Keyman Cover can be effected by way of a term life insurance provider policy and this term will depend on individual circumstances.
* Taxation position - We recommend that your accountant advises the local inspector of taxes is consulted prior to the inception of a policy to understand your individual tax position.

Click here to obtain Keyman advice and quotations.

SHAREHOLDER PROTECTION 

Shareholder Protection or Share Protection helps provides Insurance for the financial loss on the death, long term sickness or critical illness thence retirement to give the remaining partners / directors a lump sum to purchase the shareholding from that shareholder or the deceased's estate. A suitable Shareholder Insurance policy effected alongside a legal partnership / share agreement could help prevent the following issues:

* A shareholding may force a change in the balance of control of a Company.
* The business could be split up if shares in a Company are left to a number of beneficiaries
* You could be subject to a takeover bid from a competitors if their is insufficent funds to move forward
* Remaining partners may not have sufficient funds to acquire the shareholding which could lead to a forced sale
* On death, Company shares may pass under will or intestacy to people who maybe disinterested or unsuitable
* Loss of confidence by the Company's bankers or investors.

Business Trusts & Legal Agreements

Legal Agreements - Business protection policies should be written to reflect the requirements of the partnership / shareholder / key person agreement. Whilst we are unable to provide specific legal advice we can give generic information regarding the typical agreements used.

Double or Cross Option Agreement 

Both parties enter into an agreement where, if the surviving shareholders exercise the option to buy, then the deceased's estate must sell. If the deceased's estate exercise the option to sell, then the surviving shareholders must buy.

Single Option Agreement

Applicable in the advent of Critical Illness or Total Disbility, an option compelling the other shareholder's to buy their shares.

Buy & Sell Agreement

On death the estate is obliged to sell. The surviving partners are therefore obliged to buy.

Life Insurance Trusts

Policy is set up by Trustees in a Trust to ensure policy proceeds get payable for the benefit of other parties

Life of Another 

A Policy is set up to ensure that the plan proceeds get directly payable for the benefit of other parties not oneself

Once suitable agreements in place, the life insurance can be calculated with the following issues:-

* The value of Business goodwill
* The value of the capital or shares held 

Click here to obtain Shareholder Protection advice and quotations.

 EXECUTIVE INCOME PROTECTION

Executive Income Protection or Key Person Income Protection helps provide a payment to the Company that allows the employer to provide a % of their salary in the event of long term illness or accident. This sum is payable for as long as it takes to return to work or plan end. Dependant on the type of cover, this maybe payable to that individual or to the Company to help source new staff until that person returns to work.

• Designed to pay out an Income not lump sum on accident or sickness
• Usually has a waiting or deferred period from 4/8/13/26/52 weeks 
• PHI Benefits are currently paid out tax free on claim until you return to work or plan end date
• Income Insurance Benefits may be level or inflation linked 
• Option for Group Income Protection
• Medical evidence may be required and a medical examination for those with health issues
• Premiums may be guaranteed or reviewable
• Cover may be based on maximum of, say 75% of your pre-incapacity earnings  
• Income for taxation purposes usually treated as PAYE; recommend you contact your local Inspector of Taxes for advice.
• Waiver of Premium (where the Insurer waives/protects & covers your premiums after a deferred period of 4/8/13/26 weeks due to sickness or accident)

Click here to obtain Executive Income Protection advice and quotations from Business Life Insurance Providers.

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