Updated: April 20, 2024
A Concise Guide to Business Protection Insurance
What are the insurance options for business protection? Discover all the ways business protection insurance can help protect your business interests
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Business protection insurance is a catch-all name for the ways you can insure your business against the loss of a key employee or a business owner due to death, long-term serious illness or disablement.
It is sold by UK insurance providers to ensure business continuity and succession planning, something overlooked by many business owners, particularly when the company is small.
This guide explains the options available under the business protection insurance umbrella to help you get a clearer understanding of the kind of cover you might want to consider getting sorted to protect your business and key employees.
Read on for all the info or click a link to jump ahead:
What is business protection insurance?
Business protection is a range of insurance policies which can help protect businesses from financial losses in the event of key people – business owners or key employees – dying, being diagnosed with a critical illness or being unable to work due to disablement.
The insurance can be taken out to protect partnerships, shareholders, sole traders and key employees, although how the insurance is set up will depend on your specific business needs.
A business protection insurance policy can be set up to insure more than one life. In most circumstances, in the event of a claim being made, the cash lump sum would be paid out to the business or remaining owners of a business.
There are four types of business protection insurance you can get:
- Business loan insurance
- Key person insurance
- Shareholder protection insurance
- Relevant life insurance
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Product type definitions
The table below provides simple at-a-glance definitions for the four main types of insurance which fall under the business protection umbrella:
| Type of Insurance | Definition | Protects | Benefits |
| Business Loan Cover | Life insurance, bought by businesses to help repay business debts if the owner dies. Critical illness is an optional extra | The person guaranteeing the debt, often the business owner may also be a partner or business director | The business; payout goes towards repaying business debts at a difficult time |
| Key Person Cover | Life insurance bought by businesses to help provide funds to replace staff and cover any lost income streams during a tricky transition phase, Critical illness is an optional extra | Any key employee; for example, a business owner or director, your CEO, finance director, top sales person or head of technology | The business; funds can be used to recruit a suitable replacement or replace lost profits |
| Shareholder Protection Cover | Life insurance bought by businesses to ensure available funds to purchase shares if an owner or shareholder dies. Critical illness is an optional extra | Business Owners | Proceeds paid to remaining owners to fund the buying of shares from the deceased’s estate for a fair value and retain control of the business |
| Relevant Life Cover | Individual life insurance which company directors or owners can buy for themselves (if they are paid through PAYE) or their employees | Small business employees | The family of the protected employee |
If you know you need to get some protection in place for your business but aren’t quite sure where you should start, get in touch to speak to one of the independent financial advisors we work with. They will be able to discuss your circumstances and help you identify the areas where you may be most vulnerable.
With access to all the insurance providers in the UK, they will save you time, hassle and money. And ensure you set up the right insurance for the most competitive price available.
Get the right insurance protection for your business
Maybe you have a mortgage on your business premises or a business loan. Should your business falter due to your death, or the loss of another partner, if there are insufficient funds to cover the debts, a lender could go to your guarantor or their estate to recoup the debt.
Some lenders will refuse to loan you money for your business if you do not have appropriate business loan protection or key person insurance in place.
The tax treatment of key person insurance when set up to protect debt repayment is also slightly different so it’s wise to seek independent advice.
If your business is reliant on one or two key employees, owners or directors then key person insurance is something you should consider to protect your business in the event of death or critical illness of any of these vital members of your team, regardless of whether you have outstanding debts. The right level of key man insurance can help by giving your organisation a financial cushion as it transitions through a difficult period.
Relevant life cover is useful if you don’t have enough employees to set up a group Death in Service insurance plan. Relevant life cover might help you to attract new talent to join your firm as it can be a significantly useful way to reduce the cost of holding personal life insurance.
Employers get tax relief and National Insurance relief on relevant life premiums and employees make savings by not needing to pay for life insurance from their taxed income.
If you’re a small business owner and don’t yet have any kind of business protection insurance in place, talking to an independent financial advisor might help you understand where your vulnerabilities are, and how best to protect yourself, your profits and the members of your team.
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Talking to a professional independent financial adviser could help you make the right decisions about the ways you could help protect your business or attract new talent to your organisation.
Make a quick online enquiry or call 0808 189 0463 for a free no-obligation chat and we’ll match you with one of the experts we work with.
All the advisors we work with are fully qualified to provide advice and are authorised and regulated by the Financial Conduct Authority. They are independent financial advisors with access to all the insurance providers across the entire UK market.
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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in business protection insurance. Ask us a question and we'll get the best expert to help.
Richard Angliss
Finance Expert
About the author
Richard Angliss has made a career in financial services which stretches over 40 years.
His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.
For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.
At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.
With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them. Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.
He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.
