Business Protection Life Insurance Made Simple

From protecting your company’s shares to insuring the lives of key members of staff, this article explores the ways life insurance can be used for business protection and ensure continuity in the face of adversity…

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Types of business protection life insurance

There are four types of business protection available:

Insurance providers understand that businesses need products to help make protecting their interests easy to arrange and simple to handle, yet the multiple products on offer and the sometimes complicated terminology can muddy the waters.

So let’s break things down by summarising each product in a simple way we can all understand…

Key person insurance

This can be used to protect your business if you lose a crucial member of your team due to death or critical illness. For example, if you’re an online company reliant on the technology guru who knows how to do magical things with code no-one else in the office understands, you can ensure you have the financial resources to cover their loss to the business.

The company pays the premiums and owns the insurance policy. In the event of a payout, the money can be used towards finding a suitable replacement and help cushion any short term financial losses the business might incur during a potentially difficult transition.

According to research by one of the leading insurance providers, 40% of businesses would struggle to keep trading if a key person or company owner died or became critically ill. And yet, more than half of trading companies don’t have any key person insurance in place.

For more information on how key person insurance works, see our Guide to Key Person Insurance.

Business loan insurance

When a company takes out a loan, some lenders will insist that insurance is in place to protect their risk before agreeing to lend the money. In such cases, lenders will want to know that the lives of the key members of a company’s success are insured.

The business takes out life cover on their crucial team members and, in the event of a claim, the payout will go towards paying off the business debts.

Shareholder protection

This can be bought by the company to protect the interests of the main company shareholders. This uses life insurance to ensure that funds are made available to purchase the shares if an owner or shareholder dies. Like key person insurance, it’s also possible to protect against critical illness but you will pay more for the extra level of protection.

According to research less than 40% of businesses have shareholder protection in place and are putting the interests of the company, and themselves, at risk by failing to have contingency plans in place, should the worst happen.

Read our shareholder protection article for more information.

Relevant life cover

Although not strictly a product to protect your business, it falls under the same umbrella term because it is often used by business owners to reduce the cost of privately-held life cover. This life insurance is bought and paid for by the company but, in the event of a claim, pays out to the insured employee’s family or beneficiaries.

Relevant life insurance could save a small business owner money due to the tax advantages it offers. No income tax is payable on premiums as the cover is not treated as a benefit in kind. In addition, premiums for relevant life cover can be declared as a business expense and help reduce your corporation tax bill.

Read our article on relevant life cover to find out more.

What options should I use to protect my business?

What kind of cover you should put in place to protect your business interests will depend on how your company operates. Areas of vulnerability can vary from business to business.

If you’re starting from behind the eight ball and currently have no business protection, think about what would happen if you lost a key member of staff or something happened to you or one of your co-owners.

Weaknesses which might apply to one business won’t necessarily apply to your company needs. Get expert, unbiased advice about how you can protect your business interests by talking to one of the independent financial advisors we work with.

Speak to an expert

Call 0808 189 0463 or make an online enquiry for a no-obligation chat. We’ll match you with one of the independent business experts we work with.

They will talk you through the business protection options most suitable to your business needs and get quotes so you can get a handle on how much the right level of insurance might cost.

All the advisors we work with are experienced in helping protect businesses and, with access to all the insurers in the UK, know which products will provide the best protection for business continuity when faced with adversity.

We'll match you with your perfect financial advisor

Save time and money with an expert who specialises in cases like yours

We'll match you with your perfect financial advisor

Save time & money with an expert who specialises in cases like yours.

We’ll match you with your perfect financial advisor – for free.