Business protection insurance is a type of insurance that protects businesses from financial losses in the event of the death, critical illness, or disability of a key person in the business. Key people can be business owners, partners, directors, or key employees.
These insurances can take several forms – although we cover them below, in the first instance, it’s worth booking a chat with the team to talk through your unique situation and circumstances to determine what are potential options for your business.
Business protection insurance is important for businesses of all sizes, but it is especially important for small businesses that rely on a few key people. If one of these key people is unable to work, it can have a devastating impact on the business. Business protection insurance can help to mitigate these risks and protect the financial future of the business.
Here are some of the specific reasons why business protection insurance is important:
- It can help to keep the business running smoothly in the event of a key person’s death or illness.
- It can provide financial support to the family of the deceased or ill key person.
- It can help to prevent the business from going into financial difficulty.
- It can help to protect the investment of the business’s owners and shareholders.
- It can help to ensure the continuity of the business.
If you are a business owner, it is important to consider getting business protection insurance. This can help to protect your business and your family’s financial future in the event of an unexpected event.
The different types of Specialist Insurance available
Key Person Protection Insurance
In most small and medium sized businesses, the success of the business depends on just one or two key people. If you’ve worked with these people for many years it’s easy to underestimate just how value they add to the company. Unfortunately, we can never be sure what’s round the corner. Sometimes, without warning, life throws us a curve ball and this is why business protection is so important. You can’t predict what will happen in the future, but you can make sure you have the right protection in place to keep your business operational if a key person becomes critically ill or dies.
Key Person Protection (also known as key man insurance or key person insurance) allows a business to insure itself against the financial loss it would suffer if a key person in their business died or were diagnosed with a specified critical illness, during the length of the policy.
Key Person Protection is a life assurance or life assurance and critical illness cover policy taken out to cover the life of a key person within your business. The policy is owned and paid for by the employer, so any pay out is payable to the employer and not the employee.
Relevant Life Insurance
Relevant Life Insurance is a term assurance plan available to employers to provide an individual death in service benefit for an employee. It pays a lump sum if the person covered dies or is diagnosed with a terminal illness, whilst employed during the term. The Relevant Life is paid for by the employer, and although the plans are similar to most other types of life cover except they aim to provide a tax efficient benefit provided by an employer for an employee.
Shareholder or Partnership Cover
A policy that can provide businesses with a cash lump sum in the event one of the owners dies or suffers a severe illness. This helps the remaining business owners minimise disruption to the business, by providing capital that enables them to buy that shareholder’s or partner’s shares and so keep control of their organisation.
Business Loan Protection
This provides a lump sum to cover your business loans and other credit facilities if a business owner dies or becomes seriously ill. In the event you lose a business partner, you may want or need to repay outstanding business loans, some of which may have personal guarantees or have to be repaid when someone dies.