If you are a savvy business owner and want to protect your business to ensure continuity in the face of adversity then business protection is for you. In this blog we aim to discuss what business protection is, who it is useful for and why you might need it. We also want to help clarify some of the options you have when taking out business protection products in the UK.
So, what is business protection?
Business protection is a type of insurance taken out using UK insurance providers, by business owners to help protect the company against loss of its owner or a key employee should they be suddenly unable to work through death or critical illness.
It can often be overlooked by small businesses but is equally important to businesses of all sizes so business owners, make sure you are well versed in the range of business protection options available to you and your company.
What types of business protection insurance are there?
There are four main types of business protection insurance out there, each with a slightly different protection focus:
- Key person cover
- Shareholder protection insurance
- Business loan protection insurance
- Relevant life insurance packages
We will look at each of these individually to see who they protect and the benefit of each type.
1. Key person cover
Key person cover is a type of life insurance used to replace staff in the event of death or during complicated transition periods. It is used to cover employees the business cannot survive without – for example, the managing director or CEO, without whom the business could not function properly.
This type of protection covers the business’ expenses in meeting any emergency costs in order to protect the future of the business. It would provide a cash lump sum used to recruit a replacement member of staff or to replace lost profits due to the loss of the covered key member of staff.
Critical illness insurance can be added to this as an optional extra. In which case the company could also claim for loss of earnings should that key member of staff need to take time off due to a long-term illness or disability.
2. Shareholder protection insurance
Shareholder protection is a type of business protection insurance held exclusively by the business owner that protects the assets held by a shareholder of the business should they pass away. It is therefore only applicable with businesses with multiple shareholders.
In the event that a shareholder pass away the pay out from shareholder protection insurance would guarantee that the business has enough money to buy back any shares that person held in the company in order to provide a safety net and promptly maintain control of their company. This can help prevent the share going to the estate of the deceased, leaving it up to the family what to do with the share in the business or an inexperienced family member trying to replace the original shareholder.
As with key person insurance, critical illness cover can also be added onto this type of insurance plan to cover shareholders who develop specific illnesses.
3. Business loan protection insurance
Business loan protection insurance is a type of life insurance that will protect your business should you pass away as the business owner, partner or director by ensuring any debts that the business has are re-payed. Again, critical illness cover can also be added for specific illnesses.
4. Relevant life cover
Life insurance is not specifically a type of business insurance, it is a type of personal insurance policy that company directors or employees of small businesses can purchase for themselves to protect their family should something happen to them. It is relevant to anyone paid by PAYE within the business and is often a lump sum pay out to the immediate family detailed on the insurance policy.
Life insurance can also be paired with critical illness cover, income protection and/or unemployment protection should you be unable to work for whatever reason.
How do I know which type of business protection insurance I should opt for?
Speak to Martyn, our accredited independent financial advisor who has access to all UK insurance providers and will be able to advise you on the best insurance products for you and your company’s needs as well as help you find a great deal.
Get protected today to help protect you, your business and your family in the future.