What is Business Protection?

According to the latest State of the Nation Report from Legal and General, a major challenge with Business Protection is that many people don’t really understand it.

For example, many have heard of ‘Key Person Cover’, but don’t really know what it does or if it’s right for them.

At best, Business Protection ends up pushed towards the bottom of a to-do list or even worse, Company Owners don’t get the advice they need at all.

Either way, this could leave many Small Businesses at risk.

A simple introduction

In short, Business Protection is a key part of Business Continuity Planning.

It’s about making Businesses more financially resilient should the worst happen – Key people being unable to work due to sickness, serious illness or passing away.

In simple terms, Business Protection plans are made up of what are essentially every day insurance products such as –

• Life Insurance
• Critical Illness Cover
• Income Protection

to create products such as –

• Shareholder Protection
• Key Person Cover
• Debt Cover

These help the business –

• Protect ownership and control
• Protect profit
• Repay and/or service debt

In the event of a claim, the business will receive a much needed cash injection to minimise any disruption to the business.

This could be used to protect profit, cover the costs of finding a replacement / locum or repay outstanding debts.

Already have Commercial Insurance?

Many companies have ‘Commercial Insurance’ in place. This tends to cover things like Employer Liability, Public Indemnity and equipment which is important.

However, these policies don’t cover the biggest financial threat to the business – The loss of the people that are key to its success.

While this is a problem, there is arguably a bigger problem – relatively few Financial Advisers are talking about it.

Why? Well this could be a for number of reasons –

• Lack of specialism
• Lack of appetite
• Lack of knowledge

Whatever the reason, this means that Business Owners could be at risk of not getting the holistic advice they need to make informed decisions about their financial security.

Do you need Business Protection?

The good news is, it’s easy to find whether you need it by asking yourself –

1. Do you have a profitable business?
2. Do you have two or more shareholders?
3. Do you have any business debts?

If the answer to any of these is YES, then ask yourself –

1. If you lost a Key Person/Owner, what impact would this have on your profit and personal income?
2. If you lost a Shareholder, what would happen to the ownership / control of your business?
3. If you lost a Key Person/Owner, how would any business debts be serviced?

If the answer to any of these causes you concern, then Business Protection could be the answer.

Business Protection doesn’t have to be taxing

Business Protection premiums are usually paid for by the business and the tax treatment is dependent on the type of policy.

There are some policies which are treated as employee benefits which are usually 

• Completely Tax Deductible for the company 
• Not treated as a P11D Benefit in Kind for the employee.

Namely these are –

• Relevant Life Plans (Life Cover)
• Executive Income Protection (Sick Pay)

As these products are available to salaried employees, in many cases this can include the  Business Owners themselves.

This could therefore provide a tax efficient way for Business Owners to protect their personal income and their families without affecting their personal disposable income.

Of course everything is on a case by case basis and needs to be right for each individual and their business. Business owners also need to seek specialist tax advice as well financial advice.

However, the most important thing is that Business Owners get the advice they need to make good decisions about the financial security of their companies and their families.

For a no obligation consultation, get in touch and we will help highlight the key risks and what you can do to make your business more financially resilient.

(Please note, we don’t give tax advice or investment advice, but are more than happy to work with your Accountant and Wealth Manager to make sure you get the right advice).