Business ProtectionKey Man Insurance, Succession Planning, Shareholder Protection & Business Estate Planning
When a key person in a business dies it can have a devastating financial effect. You can help safeguard your business against the death, terminal or critical illness of a key person with key person protection.
What is Key Person Protection?
Put simply, Key Person Protection (also known as key man insurance or key person insurance) is a business insuring itself against the financial loss it would suffer if a key person in their business died or were diagnosed with a specified critical illness if chosen, during the length of the policy. It also pays out if the key person is terminally ill and meet our definition, except in the last 12 months of the policy.
How does Key Person Protection Work?
Key Person Protection is a life assurance or life assurance and critical illness cover policy taken out to cover the life of a key person within your business. The policy is owned and paid for by the employer, so any pay out is payable to the employer.
Why do I need Key Person Protection?
The loss of a key person in your business could have a severe impact. The business could suffer badly, with sales and profits falling and increased workloads for the remaining staff.
Key Person Protection is designed to pay out a lump sum on the death of the insured key person, during the length of the policy. It is paid as a lump sum and could significantly help the business to recover. The proceeds can be used to help replace lost profit or finding and hiring a replacement.
If a shareholder in your private limited company, member of your Limited Liability Partnership (LLP) or partner in your partnership were to die could you afford to purchase their share of the business? If not there could be significant implications for the future of your business. Share protection can help you protect the ownership of your business in this situation.
What is Share Protection?
Share Protection allows the remaining partners, shareholding directors or members to remain in control of the business following the death of a business owner.
How does Share Protection work?
In the event of a business owner dying or being diagnosed with a terminal or specified critical illness*, share protection can provide a lump sum to the remaining business owners. This means that in the event of a valid claim being made during the length of the policy, the lump sum could be used to help purchase the deceased partners/shareholding directors/members interest in the business. *If Critical Illness Cover is chosen as an additional option for an extra cost.
Why consider Share Protection?
If a business owner dies with no share protection in place his or her share in the business may be passed to their family. This means that the surviving business owners could lose control of a proportion or, in some circumstances, all of the business. The family may choose to become involved in the ongoing running of the business or could even sell their share to a competitor. A share protection policy can help avoid these issues.
37% of businesses don’t have share protection cover in place, according to our latest survey. “Legal and General” August 2016
Estate planning for Business
We have a specialist sister company which deals with Estate Planning for Business. This takes into account what you as a business owner would want to happen should anything happen to you or any other shareholder. Do you know what would happen if a shareholder in your business died? Where would those shares go? Do you know if you business qualifies for 100% business property relief?
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