Planning for the future is a key part of business success, but it’s not just about forecasting profits, designing new products, or entering new markets.
As much as planning is about developing new things, you need to think about how you’ll protect what you’ve already got.
No-one knows what the future holds and there are any number of things that can derail a business and put its future in jeopardy.
One of the biggest risks is the possibility of losing a senior executive or ‘key worker’ due to illness or even death.
These types of tragic events can throw any business into turmoil.
While you won’t be able to protect yourself from the tragic personal loss that comes with these types of events, you can protect your business financially by investing in a few key insurance protections that can at least reduce the financial impact on your business.
In this quick guide we look at the main types of business protection every company should consider investing in.
Shareholder protection insurance
Losing a shareholder to death or illness isn’t just a great personal loss, it creates a lot of uncertainty around what will happen to the outgoing shares, and how the remaining shareholders can retain them – and control of the company.
Shareholder protection provides a lump sum payout to the remaining shareholders in the company, which they can use to buy back any outgoing shares from a deceased shareholder’s estate or beneficiaries.
Without shareholder protection, the risk is always there that the outgoing shares will be retained by the estate(which can benefit financially from the shares despite having no involvement in the running or success of the business).
Or, the outgoing shares could be sold to a third party, meaning an external voice coming into the business.
Shareholder protection insurance simply makes sure the remaining shareholders have the finances available to buy the shares back and retain control of their company, while also ensuring the outgoing shareholder’s estate receives fair value.
Relevant Life Cover
Relevant Life Cover is becoming a more popular benefit both among employers and employees.
It’s essentially a form of life insurance that pays a tax free sum to your employee’s estate or beneficiaries in the event they die while under your employment.
You can use Relevant Life Cover for yourself or an employee provided they’re a UK resident and under PAYE.
Relevant Life Cover can be highly appealing to high earning employees who don’t want to exceed their pension allowance and face the incurring charges that come with it.
It’s also become more popular with employers because the premium payments are usually deemed as an ‘allowable expense’ on your business’ tax returns, meaning you won’t have to pay any income tax or national insurance costs on the premiums.
Keyman insurance
Every business has a small number of key employees that it relies on for success.
Whether it’s a key executive, a top performing sales person, or an experienced and skilled engineer.
Losing these employees is a huge blow and can cause instant, and long lasting financial repercussions for any business.
Keyman insurance provides a tax free lump sum on a policy that can be used to negate any financial losses from the death of a ‘key employee’.
This could be used to cover any lost revenue, the cost of any debts or loans, or even the cost of training and recruitment to replace the employee.
Partnership Protection
If your business operates as a partnership (rather than a company with shareholders) then partnership protection is the insurance you need, as a partnership isn’t covered by shareholder protection.
However, it works much the same way in that it provides a financial payout that can help one partner retain control of their business and secure its future in the event a partner dies.
This type of cover is usually reserved for small businesses with two to three partners as the disbursement of the payout can become complicated with a larger number of partners.
Protecting your business from the worst case scenario
No-one knows what the future holds and while you may not want to think about the possibility that an employee or partner in the business could die unexpectedly, it can happen.
In these circumstances, there is no helping the immense personal loss you’ll feel, but you can help protect your business’ financial future by protecting it with the insurance and finance protection we’ve mentioned above.
If you’re looking to protect your company, get in touch with us at Rigby Financial. Our team of experts are available to help you find the right type and level of business protection to ensure your company is as prepared for the unexpected as it can be.
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