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Professional relevant life policy services: There is not a one size fit all solution for business protection. It is not quite as easy as getting a £1 million pound life insurance policy for each of the directors and then thinking the business is safe. Instead a business should consult with a business protection expert who can then design a bespoke solution individual to the business Often the policies need to be written in trust and it is also very important to look at the tax position of the policies both the premiums payable and how these are treated and also the sum assured upon a claim. We have helped many directors and business owners protect their businesses. See even more info at Relevant Life Policy.
Who can have Key Person Insurance: Any business looking to protect their business from, life cover, terminal illness, critical illness cover (covering illnesses such as heart attack, stroke, cancer). As will as the typical limited company businesses key person cover can benefit sole traders and partnerships. As mentioned above it is important to get the right level of cover, set up in the most tax efficient manner to give peace of mind, protect the business profits and reduce business risk from the loss of a valuable employee. It gives a much needed cash injection to give cash flow by means of a lump sum payment.
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.
Premium Equalisation: Shareholder Protection Premium Equalisation is an essential aspect of business trust policies. When a group of shareholders decides to take out an own life policy individually, they may need to equalize the premiums paid. This is done to prevent HMRC from considering unequal premiums as a “gift” or “wealth transfer” from those who are paying more to those who are paying less. If HMRC views this as a gift, there could be inheritance tax implications if there is ever a claim.
Also above we mentioned the spouse desperate to sell the shared might sell these to another competitor. Again the remaining shareholders would not want this to happen as again this is a major threat to their business and could lead to a competitor taking over the business. Therefore a shareholder protection policy taken out by each of the business partners giving the shareholders the funds required to by the spouses £1,000,000 worth of shares would stop the above and allow the shareholders to retain control of the business. it will also ultimately mean the value of the shares that they each own will now have gone up in both value and percentage.
Business loan protection helps protect against unexpected risks and stress in critical situations. With this form of protection in place, the guarantor’s estate will not be held “personally liable” if something went wrong. This offers peace of mind knowing that their personal assets won’t be affected if something happens to them or another co-owner/director. Furthermore, creditors are also secured since they know that the debt will still be repaid even if certain events occur. Loan protection offers reassurance for everyone that involvement in a commercial transaction carries less risk when compared to unprotected scenarios.
Often called key-man insurance this type of policy is sometimes miss understood. It is important to ensure that the policy is set up in the correct manner using the right trusts or structure. There are also a lot of confusion and miss information on the tax treatment of these policies. The policy can be for life only or for life and critical illness cover . In another article we also explore key person income protection insurance. The death or illness of a key employee can have devastating consequences for a business and thus protecting a business from this should be an important part of protecting a business if the financial impact and help the business survive a difficult time. Discover additional info on Key Person Income Protection Insurance.