29/06/21Is your business protected? Some simple steps can give you peace of mind
If you’re a business owner, how protected is your business? The unexpected can and does happen. Accidents, illnesses, and death within your workforce can have a huge impact on your business operations. However, there are policies available that can provide a safety net for your business, while giving you and your employees peace of mind.
As you review your business’s current safety net and long-term plans, here are four policies that are worth considering:
1. Relevant life plans
A relevant life plan can help you attract high-calibre candidates when you’re hiring, as well as providing personal peace of mind. Relevant life plans offer a cost-effective way for businesses to cover the life of an employee, with the policy paying out a lump sum to an employee’s family or dependants if they pass away. A policy may also pay out if an employee is diagnosed with a terminal illness.
It can provide additional financial security for your loved ones and that of your employees.
As a relevant life plan is an individual policy, they are usually used to provide protection for high earners and directors. If you would like to offer wider cover, group life insurance can provide a solution. Please contact us to learn more.
2. Group critical illness and income protection
While relevant life plans can provide security for loved ones should the worst happen, a group critical illness and income protection policy could provide a financial safety net if an accident or illness meant you or an employee needed to take an extended period off work.
An income protection policy provides a regular income if a named person is unable to work. The income is usually a portion of your regular salary – 60%, for example. It can help ensure essential outgoings are covered, even if you’re unable to work.
In contrast, a critical illness policy will pay out a lump sum on the diagnosis of certain conditions that are named within the policy, such as cancer or stroke. It can provide a cash injection that means you can take time off work, pay off debt, or make adjustments to your home if needed.
As with relevant life plans, these policies can protect both you and your employees and can help attract top talent when hiring.
3. Key person cover
There are likely people within your business that play an essential role in its day-to-day running and long-term plans. The loss of a key worker can devastate a business, leaving staff facing immediate challenges and impacting long-term ambitions. If you’re a business owner, you’re likely to be a key person but you may have other employees that fall into the category as well.
While the impact of losing a key person can be huge, less than one in five SMEs take out key person cover, according to Legal and General. Key person cover would pay out a lump sum if a key person passed away or, in some cases, if they became ill. This cash injection can help the business remain afloat, whether through hiring a new member of staff or simply giving you some breathing space.
4. Shareholder protection
Shareholder protection can provide a vital safety net for your business if a shareholder were to pass away or become seriously ill. The loss of a shareholder can significantly affect a business and lead to uncertainty. A shareholder protection policy allows business owners to buy shares back.
This can help minimise business disruptions and means you don’t need to take capital out of the business to purchase the shareholder’s stake in the firm. It can also help you avoid a beneficiary acquiring the shares through an inheritance. Taking out shareholder protection can provide long-term security for a business.
Don’t forget to take advantage of tax breaks
As the business owns and pays for these types of policies, policy premiums can often be treated as tax-deductible business expenses. As a result, protecting your business may not cost as much as you thought. In most cases, policies that company directors can benefit from, such as relevant life plans, aren’t treated as a benefit in kind, so it can reduce personal tax bills too.
Choosing the right policies for you and your business can mean you save money while still reaping the benefits of protection policies.
Risks to consider before taking out a policy
Several risk considerations need to be taken into account before you proceed. It is important that you are aware of these:
- These contracts are designed to provide a high level of cover at minimal cost and therefore do not acquire a surrender value at any time. If for any reason you stop paying premiums, cover will cease.
- At the end of the term selected, cover will cease and no further benefit will be payable.
- If you have existing protection plans in place you must not cancel any existing policy until the new policy is in force.
- All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change.
If you have any questions about protecting your business or how you can take advantage of tax breaks, please give me a call.