Key Person & Business Protection

Business Protection is life insurance designed to protect your company’s future. Our advice on business protection can cover a number of overlapping and often complex issues.

Critical illness cover can be added to most types of business protection policies, thus providing further protection should the insured person be diagnosed with a specified critical illness.

Key Person Insurance

Key Person Insurance also known as Keyman Insurance is a policy that is taken out on the life of a key person. Key people are those that are relied upon by the business whether that is to design products and systems, to generate new business, or if they have specialist skills that are crucial to the success of the business. 

Key Person Insurance is an insurance often overlooked but it's vital. The survival and profitability of the business could be affected disastrously if you lost one of your key people through death or serious/ critical illness.

The policy is set up and paid for by the company, with any lump sum benefits also being paid to the company in the event of a claim.  The funds from an insurance pay out could be used to help replace lost profit, or to find and hire a replacement for the insured key person.

The premiums on such a policy will be allowable as a business expense if conditions laid out by HMRC are met. 

Shareholder Protection

Shareholder Protection is insurance designed to pay out a lump sum on the death of a shareholding director. The lump sum then provides the surviving shareholders with the funds to purchase the shares from the deceased’s family. 

A death of a shareholder can be extremely damaging to any business. For example shareholders may have important voting rights, which directly affect the running of the business. Losing a shareholder would normally result in these rights passing to the deceased shareholder’s beneficiaries, such as their family.

A Shareholder Protection policy will be written under a special form of business trust so that any proceeds payable will be paid to the surviving shareholders.  The business shareholders should also set up an agreement that details how shares will be treated in the event of death or critical illness. These agreements are called cross option agreements.


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Relevant Life Insurance 

Relevant Life insurance is a tax efficient and cost effective way to arrange life cover with the benefit being paid out to the family. It is an alternative way for employers to provide individual death in service benefits to employees, outside of a registered group life scheme. This would be beneficial if the business does not have enough employees to meet the eligibility of a group life scheme. 

There are big savings to be made by employers who take out Relevant Life insurance policies to cover their employee’s. It is possible to save anywhere up to 50% against an individual monthly premium paid privately.

A Relevant Life policy should be written under a  discretionary trust from outset to ensure that the benefit is outside of the taxable estate of the individual.                

Business Loan Protection 

Business Loan protection is insurance taken out on the life of a key person such as a director. The policy would pay out a lump sum specific to outstanding liabilities in the event of the death of a key person. 

When taking out a commercial mortgage or large business loan, a bank or building society may insist on the key people within the business insuring their lives to cover the balance should they die during the term of the finance agreement. In the event of death, the policy benefit can be paid to the business or directly to the bank or building society that provided the finance.

On the death of a key person, lenders have the right to demand that a business clears the outstanding balance of any finance agreement immediately and in full. Most businesses would not have cash reserves readily available to clear large financial commitments so it can be hugely beneficial to put a Business Loan Protection policy in place.

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We will ask the questions to ensure we really understand you, your insurance demands and needs and deliver a truly bespoke solution for you