Business Protection

Business protection is an insurance contract that helps protect a business from the financial effects of key people being diagnosed with a critical illness or dying.

Business protection is available for partnerships (including limited liability partnerships), shareholders, sole traders, and key employees.

Key Person Protection

This is a life insurance policy written on the life of the key person but owned by the business. Critical illness can be added to the policy and the business pays the monthly premiums. A key person is classed as an individual whose skill, knowledge, experience, or leadership contributes to the continued financial success of the business. If the company it limited, or an LLP and key person suffers a critical illness or dies then the plan benefits will be paid directly to the company.  If the key person is in a partnership the policy is written on an own life basis and may be placed in trust for the benefit of the partners.

Ownership Protection

This is sometimes known as shareholder protection in the case of a limited company. The loss of a partner, member or shareholder can have a major impact on the success of a business in terms of ensuring continued control for the remaining owners.  Ownership protection insurance is a type of protection that provides shareholders, or partners in the case of LLPs or partnerships, with the necessary funds to buy shares from each other should a shareholder or partner pass away. When a shareholder or partner passes away their shares become part of the estate which usually goes to the family.

Shareholder protection allows business owners to buy shares back from any partner who is diagnosed with a critical or terminal illness or dies. This policy helps surviving owners stay in control and minimises disruption to the business.

Relevant Life Cover

Relevant life cover is a tax-free efficient life insurance policy set up and paid for by a company but pays out to a staff member’s or director’s beneficiaries on death or in the event that they are diagnosed with a terminal illness.

Relevant life cover is tax deductible and not classed as a P11D benefit-in-kind by HMRC. Employees covered by it also don’t have to pay income tax on the premiums. Both the business and employee don’t have to pay National Insurance contributions either.

To qualify for Relevant Life Plan status there are certain requirements the plan must meet. It must provide only life cover. No disability or critical illness benefits are allowed. The term cannot exceed the 75th birthday of the employee.

Relevant life plans allow a company owner or director to still be able to cover themselves using their business rather than their own personal income, as well as providing the perk for employees.

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