When asked, “What is your most important asset?” most company owners that we asked said it was their business or their properties. However, at Interlife we would disagree. We believe your health is a much more valuable asset. Ask yourself this, if your health deteriorated and you were unable to work, would your business continue, and would you be able to afford to pay your loans? This starts the business protection discussion.
Most companies have a business continuity plan and take out insurance to help protect their assets from fire, theft and so on. However, they can often overlook the need to protect their most valuable assets – their people. Business protection can help to protect your business should a director, partner, member or key employee suffer from a long-term illness, a critical illness, or even die. Business protection is an important part of the financial planning process for your business. It can help to pay off business loans, provide cover for key employees or help to make sure the remaining owners keep control of their company. But unfortunately, it’s one area that’s often overlooked.
Business protection should be at the forefront of every director, sole trader or partner as without this protection you expose the business to a significant risk. Premiums can be affordable and there are insurers that offer you and your employees rewards for healthy living such as free weekly cinema tickets and coffees at Starbucks. These types of benefits have been shown to increase employee engagement and help reduce the costs of insurance. At Interlife we deliver a consultative approach to our clients and design a solution to tailor your needs and budget.
The four main areas of business protection are:
Loan Protection – 65% of businesses have some form of debt, yet most businesses do not see the need to cover this. Business Loan Protection helps a business pay an outstanding overdraft, loan or commercial mortgage, should the person covered die or is diagnosed with a terminal or critical illness (if selected as part of the policy) during the policy term. When a valid Business Loan Protection claim is made, a sum equal to the outstanding debt could be paid to either the business or directly to the lender.
Key Person Cover – 53% of businesses said they would cease trading in a year if they lost a key person or owner. Key Person Protection enables a business to insure itself against the financial loss it would suffer if a key person died or was diagnosed with a specified critical illness (if selected as part of the policy) during the policy term.
A business can have many key people and a key person is anyone whose death or critical illness can lead to any loss of profits to the business. This can be in a number of ways such as clients leaving the business or suppliers losing faith.
Shareholder Protection – Over 50% of business owners have not left any will or instructions regarding the shares left behind in the event of death. Many businesses believe this is covered in their Articles of Association or in their partnership agreements but do not review this. By having shareholder protection, this gives other shareholders/partners the capital to purchase the shares of the deceased to continue and control the business.
Relevant Life – This is a life policy that is available to any employee of a business (an owner/director of a company is considered an employee) and is owned by the business and placed into trust for the employee’s beneficiaries. It is aimed at companies that are too small to offer a group life policy to their staff or to directors who are looking for more tax efficient cover as this is treated as an allowable business expense, so the business can qualify for corporation tax relief and there is no additional income tax to pay.
Do you run a company or are thinking about setting up a company? Contact Interlife or your financial advisor to find out what type of cover you should have to protect yourself and your business.