Guide to Business Protection Insurance | Spectrum Financial Advice
Date: 24 January 2022 Author: Lewis Cable
Spectrum FA Guide to Business Protection Insurance

Spectrum Financial Advice Guide to Business Protection Insurance

What is Business Protection Insurance, who should have it and why? Learn everything you need to know about effectively protecting your business and its employees in our comprehensive guide to Business Protection Insurance.

Contents

  • Spectrum FA Guide to Business Protection Insurance UK
  • Types of Business Protection Insurance UK
  • Guide to Business Protection Insurance
  • Shareholder Protection Insurance
  • How Does Shareholder Protection Work?
  • Who Pays for a Shareholder Protection Policy?
  • Who Should Have Shareholder Protection and Why?
  • How Spectrum FA Can Help You with Shareholder Protection
  • Key Person Protection Insurance
  • How Does Key Person Protection Work?
  • Who or What is a Key Person?
  • Who Pays for Key Person Protection?
  • Who Should Have Key Person Protection and Why?
  • How Spectrum FA Can Help You with Key Person Protection
  • Business Liability Protection Insurance
  • How Does Business Liability Protection Work?
  • Who Pays for Business Liability Protection?
  • Who Should Have Business Liability Protection and Why?
  • How Spectrum FA Can Help You with Business Liability Protection
  • Death in Service/Relevant Life Plans
  • How Do Death in Service/Relevant Life Plans Work?
  • Who Pays for Death in Service/Relevant Life Plans?
  • Who Should Have Death in Service/Relevant Life Plans and Why?
  • How Spectrum FA Can Help You with Death in Service/Relevant Life Plans
  • Group Protection Schemes
  • How Do Group Protection Schemes Work?
  • Group Life Insurance
  • Group Critical Illness Insurance
  • Group Income Protection Insurance
  • Who Pays for Group Protection Schemes?
  • Who Should Have Group Protection Schemes and Why?
  • How Spectrum FA Can Help You with Group Protection Schemes

Spectrum FA Guide to Business Protection Insurance UK

Spectrum FA specialise in helping companies across the UK obtain suitable business protection policies to provide them with the necessary contingency plans to protect their business in the event of unforeseen circumstances. But what exactly is business protection insurance, who should have it and why? Learn everything you need to know about effectively protecting your business and its employees in our comprehensive guide to business protection insurance UK.

Business Protection Insurance guide

Types of Business Protection Insurance UK

Business protection policies can be roughly divided into two categories:

  1. Policies that protect your business profits, future growth and ability to run smoothly
  2. Policies to protect your employees, which are typically offered as part of employee benefit schemes

Types of business protection insurance in the first of these categories include:

  • Shareholder Protection Insurance
  • Key Person Protection Insurance and
  • Business Liability Protection Insurance

Types of business protection insurance in the second of these categories include:

  • Group Protection Schemes and
  • Death in Service/Relevant Life Plans

 

Guide to Business Protection Insurance

The following chapters of this guide will provide more detailed information on what these different business protection policy types are, how they work, who should consider taking them out and why it is so important for all types and sizes of business across all industries to have them.

Shareholder Protection Insurance

Often also referred to as Ownership, Partnership or Director Share Protection insurance, Shareholder Protection Insurance policies are designed to protect companies in the event of one of their shareholders/partners dying or being diagnosed with a specified critical illness.

How Does Shareholder Protection Work?

A shareholder protection policy allows you to insure your company against the death of one of its partners or shareholders by making a lump sum pay-out in the event of death. This lump sum payment can then be used by your company’s remaining partners to buy the deceased shareholder/partner’s shares in the business outright, without the stress of having to raise the necessary capital.

If critical illness is included in the policy (policies offer critical illness insurance as an add-on), the policy will pay out a lump sum in the event of the insured shareholders/partners being diagnosed with a critical illness, enabling him/her to immediately sell his/her stake in the company to remaining partners/shareholders.

Who Pays for a Shareholder Protection Policy?

Shareholder protection insurance is typically paid for by the company. It is, however, possible to make different arrangements. For further information and guidance on this, please contact our team of expert advisors today.

Who Should Have Shareholder Protection and Why?

Any company involving two or more partners or shareholders, including LLP (Limited Liability Partnerships), LTDs (Private Limited Companies) and PLCs (Public Limited Companies) -regardless of size and industry – should consider taking out a shareholder protection policy. Here is why…

If two or more partners own your company, considering shareholder protection to safeguard your business against one of these partners’ critical illness or death is crucial.

Without this type of protection, the deceased partner’s shares in the company are usually passed on to his/her next of kin or other beneficiaries. These beneficiaries then have a choice of either taking on the deceased partner’s role as a company owner or release the shares’ value by selling them. Both options could, unfortunately, cause you and your company problems.

Family members/other beneficiaries often have either no or little previous association with your company. As such, they may know very little – if anything – about what your business does and how it works.

Their ability to fulfil your deceased partner’s role to the same standard as he/she did may be diminished due to a lack of commercial experience and/or a number of other reasons. Their participation in your business’ daily affairs could subsequently cause remaining partners a great deal of frustration and difficulties.

Should your deceased partner’s family decide to sell the shares to release their financial value, remaining partners may have little to no say as to how – or to whom – they are sold. Even if the family consult you, it may be difficult to quickly find an appropriate buyer. This could leave both your company and your partner’s family with financial problems. You could also end up having to work with a disagreeable new owner (like a competitor, for instance).

Shareholder or director share protection insurance alleviates these worries by ensuring the necessary capital for remaining partners to immediately purchase a critically ill or deceased partner/director’s share in the company from him/her or his/her beneficiaries is provided in the form of a lump sum – thereby enabling them to remain fully in control over the company.

How Spectrum FA Can Help You with Shareholder Protection

Specialising in business protection insurance, Spectrum FA have years of experience in arranging shareholder protection policies for companies of all types and sizes.

Our specialist advisors can help you effectively protect your business’ future from disruption by an unfortunate event such as critical illness or death.

With access to the leading insurance providers, our advisors will tailor your cover to meet your specific requirements, providing you a completely bespoke service that perfectly matches your circumstances.

To learn more about shareholder protection through Spectrum FA, please contact us today to speak with one of our advisors and arrange for your free no-obligation review. You can get in touch by telephone: 01279 315 013, e-mail: info@spectrumfa.co.uk or online.

Key Person Protection / Keyman Insurance

Commonly also known as key man or keyman insurance, key person protection insurance is a way of insuring your most valuable employees – your key personnel – to protect your profits and secure your business. This can help your business to continue trading if such a key person should unexpectedly pass away or is diagnosed with a critical illness (if critical illness cover is selected as an add-on).

Key person insurance can help protect the profits of your business in such an event.

Who or What is a Key Person?

A key person is someone whose contribution to your business’ smooth running is of major importance to your company’s trading ability, profits and future growth. Such a valuable person could, for example, be:

  • Yourself (the owner), a partner or managing director
  • A sales manager, technical expert or innovative designer
  • Any other employee with exceptional experience, knowledge, special talents, specialist or leadership skills

In other words, a key employee is someone without whom your business would be unable to function properly/run smoothly.

How Does Key Person Protection Work?

Losing a key employee through a critical illness (if selected) or death could have both immediate and long-term consequences for your company. A key person insurance policy protects your company from these consequences by providing a lump sum in the event of an insured employee developing a critical illness or passing away.

Your company can then use this lump sum to cover:

  • Immediate expenses required to recruit/train a suitable replacement (temporary or permanent)
  • Financial losses due to loss of productivity, contacts or contracts/trade
  • Repayment of business loans/other outstanding business obligations

In short, key person protection allows you to mitigate the financial impact of unexpectedly losing a valuable employee due to a critical illness or death.

Who Pays for Key Person Protection?

While your company would take out a key person protection policy in relation to an employee, it would be taken out by your company to protect your business. Premium payments would therefore be made by you (the company).

Who Should Have Key Person Protection and Why?

Most companies, irrespective of their size and industry, have at least one or two key employees vital to their business’ running, profits and success and should therefore consider key person protection.

To determine whether your company has any key individuals without whom your business’ ability to continue operating would be at risk, you should look at each of your employees and ask yourself these questions:

  • Is this person irreplaceable – i.e. does he/she have unique skills, talents or experience?
  • Does he/she significantly contribute to the effective, smooth running of your business?
  • Does he/she significantly contribute to your business profits
  • Do any or all your contracts solely rely on this person’s presence?
  • If he/she was no longer with your company, would some or all your crucial business contacts (customers, suppliers, etc.) leave?
  • Are there any outstanding business loans/other obligations (e.g. investors) your company would be unable to fulfil without him/her?

If your answer to any or all these questions is “Yes”, you should consider taking out key man insurance to safeguard your company against the potential impact of losing this employee would have on your business.

How Spectrum FA Can Help You with Key Person Protection

With years of experience in assisting companies across all industries obtain the most suitable business protection insurance policies to match their business’ requirements, Spectrum FA are specialists in arranging key person protection insurance.

Our expertise and access to leading insurance companies allows us to provide a bespoke service and we will recommend a policy tailored to match your business’ specific needs and circumstances.

Contact us online, via e-mail: info@spectrumfa.co.uk or by calling 01279 315 013 today to learn more and/or arrange a free, no-obligation review.

Business Liability Protection Insurance

Frequently also called business loan protection, business liability protection insurance is a policy taken out by your organisation or business to help you repay any outstanding loans (i.e. business development loans, commercial mortgages, other borrowings) in the event of a named guarantor’s death or critical illness diagnosis (if selected; critical illness cover is offered as an optional extra on many policies) and is also available as a stand-alone insurance policy).

How Does Business Liability Protection Work?

Taken out by your company/organisation in the form of life and (if selected) critical illness cover written on a specific person’s life (i.e. an owner, director or other key individual within your company against whom a loan is secured), a business liability protection policy pays out a lump sum in the event of the insured individual’s death/critical illness diagnosis.

Your company can then use this lump sum to repay any outstanding business obligations/loans secured against this person immediately and without causing your business any unforeseen financial difficulties (i.e. through trying to raise the necessary capital to repay outstanding loans/obligations).

Who Pays for Business Liability Protection?

Although business liability protection policies are taken out in relation to guarantors, they are taken out by your company to protect your business’ ability to continue trading. Premiums are therefore paid for by you (your business).

Who Should Have Business Liability Protection and Why?

Business liability insurance is essential for all companies/organisations who take out any type of business loan, commercial mortgage, asset finance or overdraft facility, regardless of whether this loan/other type of finance is sourced privately (such as, for example, from a company director, investor or any other private contributor) or from a bank or any other financial institution.

In most cases, these borrowed funds are secured against one or more specific individuals (guarantors) within the company. Should a guarantor suddenly die or be diagnosed with a critical illness, normally, any loans/finance outstanding at the time of his/her death would have to be repaid in full.

Depending on a company’s specific circumstances, this could impact not only the company’s ability to make repayments but may also put the business’ financial future and ability to continue operating at risk.

By providing a lump sum of money the business can use these funds to clear any outstanding debts. Business liability/loan protection, may also be requested by many lenders as part of their conditions for providing a loan. Having this important cover in place can alleviate these worries and allow the company to continue trading without excessive financial difficulties.

How Spectrum FA Can Help You with Business Liability Protection

Having provided businesses with specialist advice on business protection insurance for many years, Spectrum FA are experts in the area of business liability protection and will advise and guide you through the entire process.

Knowledgeable and with access to the leading British insurance providers, our advisors offer completely bespoke advice and will arrange policies tailored to match your company’s unique requirements.

For more detailed information call Spectrum FA on 01279 315 013, e-mail us: info@spectrumfa.co.uk or use our online contact form now to arrange your obligation-free (and free of charge) review.

Death in Service/Relevant Life Plans

Commonly known as death in service, relevant life cover or a relevant life plan, relevant life insurance is a business protection policy allowing companies/organisations to provide one or more individuals (directors and/or other employees) life and, if selected, significant illness cover.

This type of protection is usually offered as part of comprehensive employee benefit schemes and pay-outs made on this type of policy are made to the next of kin of the insured individual.

How Do Death in Service/Relevant Life Plans Work?

Designed to enable employers to give valued employees peace of mind in the knowledge that they/their families are protected should they develop a significant illness or pass away, relevant life plans must be issued – from the plans’ start – under trust.

The trust stipulates who will receive the death or significant illness benefit in the event of the insured person’s death or significant illness diagnosis. The insured employee will get the opportunity to name preferred beneficiaries within the trust. They can name a beneficiary for the death benefit and in the event of a significant illness, this benefit can be paid to their chosen beneficiary, or they can decide to retain this benefit.

Allowing employers to provide selected employees with tax-efficient, cost-effective life/significant illness cover, relevant life policies remain completely under the employer’s control (as the policyholder) and employers/directors choose the elements to be included in the policy.

Cover can be level (meaning the cover amount stays the same throughout the duration of the policy) or increasing (meaning the amount of cover provided increases over time to provide protection from future inflation effects) and significant illness cover can also be added to the policy. If this option is added, the policy will make a pay-out if the individual named is diagnosed with a specified significant illness and meets the policy’s definitions.

There is also a continuation benefit. This enables the insured individual to transfer the relevant life policy should they decide to leave the company and work for someone else.

It should be noted here that while the term ‘death in service’ may suggest that for the policy to pay out, the employee must pass away while at work or involved in some work-related activity, this is, in fact, not the case.

The policy will pay out if the person insured passes away at any time – regardless of where they are or what they are doing at the time of their death – throughout the duration of the insured individual’s employment with the company.

Cover ceases when the insured person leaves the company’s employment unless, of course, the continuation benefit mentioned above is actioned.

Who Pays for Death in Service/Relevant Life Plans?

Taken out by employers on behalf of their employees as part of their benefit scheme, death in service cover is paid for by the employer.

Who Should Have Death in Service/Relevant Life Plans and Why?

Worrying about how their loved ones would cope financially in the event of their death/significant illness diagnosis can be extremely stressful and distracting for employees. Affecting both their mood and attitude, this can in turn affect their overall productivity and their inclination to stay with a company.

Giving valued employees peace of mind by offering relevant life plans may alleviate these worries and thereby not only increases their productivity but also their likelihood of remaining within the company’s employment.

Offering this type of insurance as part of your benefits scheme is also an excellent way of attracting new high-calibre employees. As such, any business wishing to attract/retain valuable staff members should consider offering a relevant life plan.

How Spectrum FA Can Help You with Death in Service/Relevant Life Plans

Business protection insurance specialists Spectrum FA have advised many businesses and arranged relevant life plans for them over the years. Taking the time to understand you and your specific requirements, we offer a truly bespoke service and – guiding you all the way through the process from start to finish – we tailor our approach to match these requirements.

As we have access to an extensive range of different providers and policies, we can ensure you obtain personalised cover that is suitable for all parties involved by giving you complete flexibility and the opportunity to select the precise cover and options you need.

For more detailed information on relevant life plans and to arrange a free, no-obligation review, please contact us on: 01279 315 013 or drop us a line via e-mail: info@spectrumfa.co.uk or our contact form online today.

Group Protection Schemes

Forming part of a company’s employee benefit package, group protection schemes allow businesses to protect their most valuable assets – their employees – via a diversity of different types of insurance policies.

How Do Group Protection Schemes Work?

Group protection schemes are designed to provide employees with peace of mind that their families will be protected in the event of their death, a critical illness diagnosis and/or in the event of their prolonged absence from work due to illness or accidental injury.

What type of benefit will be paid out in the event of an unfortunate event depends on the selected type of cover, which may consist of:

1.       Group Life Insurance

Providing employees with flexible life cover, Group life insurance provides employees’ families with a comprehensive financial and practical support package at a time when it is most needed.

2.       Group Critical Illness Insurance

Group critical illness cover ensures employees are protected and will receive a pre-determined benefit if they are diagnosed with a specified critical illness.

3.       Group Income Protection Insurance

Group income protection policies provide employers/employees with important financial support in the event of a prolonged absence from work due to an illness or injury.

Who Pays for Group Protection Schemes?

Taken out by businesses on behalf of their employees as part of company benefit scheme, group protection policies are paid for by employers.

Who Should Have Group Protection Schemes and Why?

Group protection schemes are an excellent way for employers to:

  • Improve employee morale
  • Increase productivity
  • Retain existing staff
  • Attract new first-class employees

Allowing a company to become known as a caring, attractive employer, group protection is therefore highly recommended for businesses of all types and sizes.

How Spectrum FA Can Help You with Group Protection Schemes

Our experienced business protection insurance advisors are experts in assisting employers obtain suitable group protection policies to add to their employees’ benefit package.

To arrange your free review (no-obligation) or for more information on this type of business protection, please do not hesitate to call us on 01279 315 013; contact us online or get in touch via e-mail: info@spectrumfa.co.uk today.

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