Most people today are very tuned in to the need for personal financial protection solutions, to ensure that themselves and their loved ones will not suffer financial hardship on top of the other challenges posed by a death, accident or illness within their family. When we meet new clients, ensuring they have sufficient Life Cover, Specified Illness Cover and Income Protection in place to meet their needs, is always an important conversation.

We sometimes find with new clients that are business owners, that the whole area of business protection might have slipped under the radar. This tends to be the case when businesses grew from pretty humble beginnings. What started out as a one-person show may now be a thriving enterprise, with lots of people and some key individuals among them. The death or illness of one of these people could result in real financial challenges for the business and need to be carefully considered.

Business Protection

There is a range of business protection solutions available to help businesses survive the death or indeed the serious illness of someone, that would result in a financial loss for a business. These solutions provide a number of benefits for businesses;

They offer real peace of mind benefits to the directors or partners, as they remove the financial worries associated with the death or serious illness of a colleague.
They remove the need for businesses or surviving partners to borrow money to buy out a deceased partner’s share of the business, or to buy out a partner who is no longer able to work due to a serious illness.
They remove the need for a surviving family member to take a deceased person’s place in the business, in order to maintain the value of their ownership.

There are a number of different types of business protection solutions available to suit the different types of business structures and profile of owners.

Co-director’s insurance

This is a form of life assurance that is commonly used within small companies, whereby each director insures themselves against the death of their partner, enabling them to buy out the partner’s shares on death and/or serious illness. As an alternative, the insurance can be effected by the company itself.

Partnership insurance

Similar to the above,  partnership insurance is used in self-employed partnerships or in professional firms that have partnership structures. In this case, a partnership takes out insurance, protecting itself against the death or serious illness of an individual partner, enabling them to compensate the deceased partner’s estate for their share of the partnership. This means the partnership continues with the surviving partners, while the deceased’s family receives the value of their share of the partnership at death.

Key person insurance

This helps a business to minimise the impact of the death or serious illness of a key employee. This could be a senior manager or someone with specialist skills, who would need to be quickly replaced. The insurance can be used to quickly attract a replacement employee or indeed to pay off loans of the company that may have been guaranteed by the deceased.

These are examples of different forms of life assurance and illness cover, that can be used for different business related needs. The point in common though is that each will ensure the ongoing viability of the business. Can you afford not to have this cover?