BUSINESS INSURANCE FURTHER INFO
Director / Partner Share Protection
The unexpected loss of a partner or shareholding director needs to be planned for. The impact on both the business and the surviving family of the deceased partner can be devastating and without have the right procedures and policies in place can have a detrimental impact on your business.
How will your bank or other lenders react? How will your customers react? How will you find the money to buy back the shares?
With a Director or Partnership protection scheme in place it gives you, as a business owner, the security of knowing that if the worst happens you and / or the remaining owners can stay in control of the business.
For the surviving business owners having such a scheme will ensure that the business remains in the hands of those actually working in the business and that you don’t have a new business partner in the form of the deceased partners spouse or some other person nominated by their family. Equally, this will also ensure that the surviving loved ones of the deceased will be able to quickly benefit from the value of their loved one’s share in the business meaning they can focus on getting their life back on track without having the stress of their finances weighing them down.
We have a good understanding of how to put these arrangements in place and have arranged many of them. This is a complex area of financial planning and we will work with your legal advisers to ensure that the correct legal agreements such as Cross or Double Option Agreements are put in place, that the policies are placed into suitable trust arrangements at the right time so as to avoid potential tax liabilities and that you have a suitably written Shareholder or Partnership Agreement in the background.
Business Debt Protection
We all know that any borrowing taken out by the company is most often guaranteed by a director of the company. If this person dies the lender may well want to call in the debt especially if the company has no-one to stand in their financial shoes or no way of guaranteeing the loan, overdraft or commercial mortgage.
A Director’s loan to the company is another form of debt that should be covered as in the event of death they are usually immediately payable and if the company doesn’t have the cash this can become a serious issue.
Life and / or critical illness cover to cover these eventualities, taken out by the company can provide a simple solution and avoid such complications.
Key Person Insurance
A vital part of any business are the people that work there. As such it can have a huge financial impact if an important member of staff dies unexpectedly or is unable to work due to serious illness. They could be your key salesperson or best engineer.
Small and medium sized businesses are particularly at risk as much more responsibility can fall on one person’s shoulders but fortunately, you can take out insurance which can help replace the lost profits caused by the loss of this key individual, the costs of recruiting a replacement or just bringing in an interim manager to cover them.
This loss of a Keyperson can have serious repercussions on both the profitability and reputation of a company to a point that many business owners have not envisaged. It is an area that needs to be considered and reviewed regularly.
Solutions include basic life cover (or critical illness cover), owned by the business or an income protection policy that pays out to the business whilst a key employee is away ill for an extended period.
There are tax implications that need to be considered when arranging such a policy/ies, such as whether the monies received will be treated as income by HMRC, whether you will receive tax relief on the premiums and as such we would recommend that you seek advice from your accountant in this respect and to make sure that the correct sum insured is arranged to give you the right net amount in the event of a claim.
Relevant Life Plans
What is a Relevant Life Plan?
A Relevant Life Plan (RLP) is a life insurance policy. However, using pension legislation RLPs are a way of providing tax-efficient death-in-service / life insurance benefits on an individual basis to limited company directors or other employees – no matter how small your business is.
What are the key tax benefits?
Although the company makes the payments, they’re not normally treated as a benefit in kind, so they’re not included as part of your income tax assessment. For a higher rate taxpayer, this could be a significant saving.
These payments are also usually treated as an allowable expense for the company in calculating its corporation tax liability, as long as HMRC are satisfied they qualify under the ‘wholly and exclusively’ rules
Unlike a registered group death in service scheme, the benefit won’t form part of your annual or lifetime pension allowance
Who would benefit from a Relevant Life Plan?
Directors of companies looking for tax efficient life cover. It may be worth reviewing existing life cover arrangements as part of this process.
Small businesses that don’t have enough eligible employees to warrant a group life scheme but who want to offer death in service benefit to their employees
High-earning employees or directors who have substantial pension funds and don’t want their benefits to form part of their lifetime allowance.
Members of group life schemes who want to top up their benefits.