Business protection insurance services 2023: Business protection aims to help a business survive if any of its directors, shareholders or key employees either die or become seriously ill. Traditional business protection policies such as shareholder protection policies and key person insurance policies are what most people think of when they think of business protection insurance. However the market has developed over the last decade and now there are other types of business protection products that can not only help the business but also help the directors provide tax efficient policies for their families. Products such as the Relevant Life Policy and Executive Income Protection have seen massive growth over the last decade. Discover extra info on Shareholder Protection Insurance.
Keyman insurance can be an invaluable asset to a business, allowing them to cover the loss of valuable personnel such as Executives or Board Members. Often, premiums for keyman insurance are tax deductible provided certain criteria are met. Generally speaking, for the policy to be eligible for corporation tax relief it must be used to compensate for profit loss should a key individual die, have a limited term of 5 years or less and must not be convertible into another type of policy. Tax regulations vary from region to region however; therefore each business should speak with its local tax inspector to grow greater clarity on this matter before taking out any kind of coverage.
How Much Cover is Needed? When it comes to the amount of cover you need, it is important to reflect the amount that would be needed to pay the debt or loan back in full. To ensure you have the right level of protection, there are two main types of business loan protection insurance available; level and decreasing. Level protection is suitable if your debts stay at a consistent level over a set period, such as with an interest only mortgage. Decreasing protection allows you to address your liabilities in smaller amounts which makes more sense when responding to repayments on longer-term loans such as car finance. Business loan protection can provide significant support during a financially challenging time, allowing the continuity of trading while deferring payments on those outstanding debts. It’s vital that all businesses review their current debt levels regularly and consider the implications if one or more were suddenly unable to be paid off quickly, before selecting an appropriate level of loan protection insurance.
Valuing the business: One of the key factors a business owner needs to consider when valuing their company for Shareholder Protection is their company’s cashflow. This refers to the money that is coming in and going out of the business on a regular basis, including revenue from sales and payments made for goods and services. A healthy cashflow is a good indicator of a strong business, as it shows that the company has enough money to cover its expenses and reinvest in growth opportunities. When valuing a company for Shareholder Protection, advisers will often use cashflow as one measure of how much the business is worth.
Family Benefits: If for example one of the shareholders owned 33% of a business and they were to die. To make things simple lets value the business at £3,000,000 and lets say their shares are worth £1,000,000. The spouse would normally be the one who would inherit the shares. But the remaining shareholders usually would not have spare £1 million as a cash lump sum freely available. So the chances are that they might offer the spouse a smaller sum than the shares are worth. Or another option is that the spouse could sell the shares to someone else potentially a competitor. Another option would be that the spouse could potentially keep the shares and get involves in the business. But usually the spouse would have other commitments and would not want to get involved in the business.
When an individual or couple take out a mortgage then in most cases they will protect their mortgage with life insurance or life and critical illness. The same principle should apply for business that have loans, overdrafts or other type of commercial loans. However many business owners overlook and forget to cover any outstanding loans. Business loan protection is very similar to key person cover but rather than the sum assured amount covering the loss of income from the death of a key employee instead it covers outstanding debts.
Who are the Key Persons of Business? The concept of a key person is essential for any business. A key person is someone whose skills, knowledge, experience or leadership are vitally important to the long-term financial success of a company. Examples include company directors, sales directors, IT specialists and managing directors. Companies normally have several key people within their organization who provide expertise in various areas and drive development. Moreover, these individuals are very hard to replace and should something happen to one of them it could potentially cause major financial strain on the business. Discover more details on Relevant Life Policy.