With over 24 million people in the UK employed by SME’s (Small and Medium-Sized Enterprises), it should come as no surprise that small businesses are the largest employers in the UK. So many people depend on SME’s for their livelihood that it is essential that SME’s properly safeguard their future. This includes investing in Business Protection Insurance.
If a key person or crucial member of the team is lost due to a death or illness, this can have serious ramifications for small businesses. Nobody likes to think about the potential death or illness of a colleague, particularly a key colleague, but Business Protection Insurance provides a safety net should this ever occur. In such instances, it is important that you have that safety net, in order to prevent your entire business from falling apart just because of one key staff member.
So, what types of Business Protection Insurance should you consider for your business and why?
Key Person Cover
Key Person Cover, otherwise known as Keyman Insurance, is a policy designed to protect your company if you lose a key worker due to illness or death. As many small to medium-sized businesses rely on the contributions of individuals in order to help the business progress, this can be an extremely useful type of insurance to invest in, and should help your business in the event that it loses a key person.
Shareholder protection insurance is linked together with Keyman insurance, as shareholder protection allows a company to retain control of all its shares if a partner passes away. In other circumstances, shares could pass on to the deceased’s estate, where the shareholder may then be unable to make a valid contribution, or could even be a detriment to the business. In order to secure your assets, shareholder protection is recommended.
Relevant Life Insurance
This is otherwise referred to as Relevant Life Cover or a Relevant Life Plan. It is designed to provide life cover for an employee (or managing director) in the event of a death or serious illness. Relevant Life Insurance works in very much the same way as Personal Life Insurance, however, there are a number of additional benefits, including;
- The payments will not count as part of the employee’s lifetime pension allowance
- Payments made will not form part of the employee’s annual allowance
- Payments will be treated as an allowable expense
- In many cases, the benefits are paid free of inheritance tax
- Payments made by employers are not subject to income tax
A higher-rate taxpayer can save 49% (36% for basic rate taxpayers) by paying for their personal life insurance via a relevant life plan, which is a significant amount of savings.
Business Loan Protection
A company may have taken out a loan from a key person in order to get a head start on a new product launch, or to open a new office in a key location. In the event of that key person’s death, the loan may be required to be repaid immediately, so business loan protection is there to ensure that the business will have the relevant funds to meet the repayment demands. If a Business Loan Protection Policy is not in place, the business may experience extreme financial difficulties or may even have to be sold off, just to pay off the loan. Therefore it is always relevant to get business loan protection, even if you are simply using a credit card for business expenses.
While you may not feel as if you need the relevant business protection insurance policies at this point in time, you – as a business owner – need to be prepared for the worst case scenario. Having these policies in place in the event of a death or serious illness of a key person will not only help to keep your business afloat in times of need, it will also protect the livelihood of your employees and their families.