Many businesses don’t consider the financial implications of losing a key member of staff, stakeholder, or business partner. Whether it is something we would rather avoid thinking about, or something we do not want to plan for as a worst-case eventuality – this can be a critical mistake in business.

Losing a person who was once integral to the team will be an upsetting and stressful event for everyone involved, and it can often be a big financial blow to the business as well.

Challenging knock-on effects of losing a staff member can include:

  • Loss of profits or sales
  • The cost of finding and training a replacement
  • Potential loss of customers and suppliers if the key staff member was their main contact.

So as a business owner, how do you prevent a distressing event from becoming an even more troubling time for your business, and give yourself peace of mind that the financials will be covered so that you can focus on supporting your team?

Key Person Cover

Key Person Protection can be suited to your needs. It can be life insurance, with or without a critical illness cover option, or income protection cover, which a business takes out for certain important members of staff. This type of cover can provide some financial stability in the event of a key member of staff being taken critically ill, dying, or suffering an accident.

You, the business, will pay the premiums, and if the insured person dies or becomes critically ill during the policy term, the policy will pay out the agreed sum or benefit to the business.

The financial pay-out received can help ensure that your business remains viable, continues to trade, and gives you the opportunity to find a suitable replacement member of staff.

Shareholder or Partnership Protection

What happens if a shareholder or a partner in a business dies or suffers a critical illness and they become unable to, or have no wish to remain to be involved in the business? Unfortunately, this scenario is too often overlooked by SME businesses until it’s too late.

In most such cases, upon the death of a shareholder or partner, the family of the deceased party would usually request cash value for the shares or partnership value, and the surviving shareholders or partners would want to get back the shares/equity.

In the case of critical illness, the affected party may wish to retire and surrender their interest in return for cash value. Many businesses will lack the finances to make a cash payment for the value of the stakeholder’s interest. This can lead to major disputes and has on occasion led to the demise of a business.

Addressing these exposures can help avoid financial chaos and potentially terminal consequences for businesses.

Relevant Life Insurance – Tax Free Family Life Cover

Company directors and their employees can also benefit from individual life insurance to protect their loved ones. Relevant Life cover includes premiums paid by the business with tax advantages for the company, and no benefit in kind tax burden on the employee.

If you are actively employed in the business and paid at least some of your earnings via PAYE, then you qualify for Relevant Life cover*.

*The business must be a limited company for directors to benefit (not sole traders) and must be an active, trading company.

  • Cover is available up to age 75.
  • Corporation Tax deductible.
  • There is no P11D personal tax charge.
  • Tax savings can reduce premiums by up to 49%.
  • Policies are placed in trust and any claim is paid tax free to your nominated beneficiaries.
  • HMRC approved and recognised.

Even if you already have personal family life insurance in place, this product can give additional financial security for your loved ones in the most tax efficient way.

Business Loan Protection

Most small businesses have some form of debt, be it overdrafts, loans or

mortgages. These loans can help a business prosper and grow, but a significant proportion of small businesses do not have any form of insurance backing this debt. 

If the owner passes away suddenly, or is taken critically ill, these loans could quickly become a liability. Insurance can help keep the roof on your business, protecting partners, members, directors and employees – as well as their families.

Business loan insurance can cover any type of commercial debt. This includes:

  • Overdrafts
  • Commercial loans
  • Commercial mortgages
  • Directors’ Loans

Executive Income Protection

Executive Income Protection is designed for businesses to help protect against the

financial impact of their employee’s incapacity on the business. Businesses can help protect not just an employee’s salary, but can also cover dividends and P11D benefits, which form part of their overall remuneration.

Additional cover can also be chosen at outset for an extra cost to cover the employer’s pension and National Insurance (NI) contributions.

So how can we help?

This is where our trusted risk partner in Life Insurance, Sentinel Commercial Life, can assist by arranging protection in the form of life and/or critical illness covers, and, particularly in the case of life insurance only, for what can be relatively modest premium costs.

They will discuss your requirements and help you to find a competitively priced policy that provides excellent financial security for you and your loved ones. You will be advised personally by director of Sentinel Commercial Life, Martin Ward, who has many years’ experience and expertise in this area of insurance.

If you believe that you would benefit from a life insurance policy review, for either your business or your personal covers, get in touch with Sentinel Commercial Life on 01904 593507 and let them know who referred you. Alternatively, if you are an existing Gravity Risk Services client, call us on 0121 270 5809 for more information.