High quality business protection insurance solutions: There is not a one size fit all solution for business protection. It is not quite as easy as getting a £1 million pound life insurance policy for each of the directors and then thinking the business is safe. Instead a business should consult with a business protection expert who can then design a bespoke solution individual to the business Often the policies need to be written in trust and it is also very important to look at the tax position of the policies both the premiums payable and how these are treated and also the sum assured upon a claim. We have helped many directors and business owners protect their businesses. Find additional details on Shareholder Protection Insurance.
Keyman insurance can be an invaluable asset to a business, allowing them to cover the loss of valuable personnel such as Executives or Board Members. Often, premiums for keyman insurance are tax deductible provided certain criteria are met. Generally speaking, for the policy to be eligible for corporation tax relief it must be used to compensate for profit loss should a key individual die, have a limited term of 5 years or less and must not be convertible into another type of policy. Tax regulations vary from region to region however; therefore each business should speak with its local tax inspector to grow greater clarity on this matter before taking out any kind of coverage.
How Much Cover is Needed? When it comes to the amount of cover you need, it is important to reflect the amount that would be needed to pay the debt or loan back in full. To ensure you have the right level of protection, there are two main types of business loan protection insurance available; level and decreasing. Level protection is suitable if your debts stay at a consistent level over a set period, such as with an interest only mortgage. Decreasing protection allows you to address your liabilities in smaller amounts which makes more sense when responding to repayments on longer-term loans such as car finance. Business loan protection can provide significant support during a financially challenging time, allowing the continuity of trading while deferring payments on those outstanding debts. It’s vital that all businesses review their current debt levels regularly and consider the implications if one or more were suddenly unable to be paid off quickly, before selecting an appropriate level of loan protection insurance.
However, it’s important to note that there are several different methods an adviser may use when valuing a business for Shareholder Protection. Cashflow is just one factor that can be taken into account, along with other financial metrics such as net assets, market value, or earnings potential. Ultimately, the valuation will depend on the unique circumstances of your business and what your Shareholder Protection insurance policy requires in terms of coverage. By working closely with an experienced adviser who understands these various methodologies and can help you navigate through them, you can ensure that your shareholders are protected while also maximizing the value of your company.
Tax Implications: This form of succession planning is quite complex and you should seek financial advice, legal advice, tax advice and bespoke advice unique to your own situation so the guidelines below will just give a brief overview of what company owners need to watch out for. So it will be very likely that the spouse could not sell the shares at all or sell them at a massively discounted price. With a shareholder protection policy in place it would provide a lump sum payment to the remaining shareholders. The sum assured would be pre-agreed by the business owners. This would allow the individual shareholders to buy the spouses company shares at fair price.
When an individual or couple take out a mortgage then in most cases they will protect their mortgage with life insurance or life and critical illness. The same principle should apply for business that have loans, overdrafts or other type of commercial loans. However many business owners overlook and forget to cover any outstanding loans. Business loan protection is very similar to key person cover but rather than the sum assured amount covering the loss of income from the death of a key employee instead it covers outstanding debts.
How much cover to Have? Key person insurance is designed to help protect businesses from the loss of a key individual in the event of death, illness or injury. Calculating how much key person insurance to purchase may seem daunting at first glance, but it can be done if you understand the different quoting methods and calculations used by insurers. It’s important to consider other types of insurance too, depending on the individual needs. For example, businesses in their start-up stages may want to invest in both recruitment cost and business start-up coverage. This will provide extra protection and enable them to get back up and running quickly should something unexpectedly occur during this foundation period of trading. In addition, there are more specialist forms of insurance such as cyber liability or legal defense that can help protect your business from anyone making a claim against you if things don’t entirely go according to plan. Find extra details on Relevant Life Policy.