Business protection
What would happen to your business if you lost a key employee tomorrow? If a key person dies or is diagnosed with a specific critical illness or permanent total disability, it can have a huge financial effect, leading to loss of customers, damage to market reputation and reduced confidence from creditors.
Business protection insurance protects organisations against financial loss by paying out a cash injection to help replace loss of profits, repay business loans and/or assist in the hiring of a suitable replacement.
Here are some of the more popular business protection insurance policies:
Key person insurance
When a key person within any business dies or is diagnosed with a critical illness, it can have a devastating financial effect, leading to loss of customers, damage to market reputation and reduced confidence from creditors.
Key person assurance pays out a cash injection to help replace loss of profits, repay business loans and/or assist in the hiring of a suitable replacement. It can literally be the difference between a company going under or continuing to trade – and premiums are typically fairly low.
Shareholder protection insurance
If a business owner dies with no share protection in place, their share in the business could be passed to family members who may choose to become involved in the ongoing running of the business – or even sell their shares to a competitor.
Shareholder protection insurance allows the remaining partners, shareholding directors or members to retain control of the business following the death of a business owner (or their diagnosis with a terminal or specified critical illness).
Legal agreements are prepared which stipulate how shares would be managed if a shareholder passes away. The policy, which is available either for fellow shareholders or the company as a whole, will pay a lump sum to the remaining business owners which can then be used to purchase the shares of the deceased holder.
Surviving family members will also receive financial compensation as the policies guarantee a fair buy-out price for them.
Business loan protection
Many businesses have financial liabilities such as commercial loans and mortgages, bank overdrafts, venture capital loans or directors’/personal guarantees loans.
The risk with such arrangements is that the ability to guarantee or repay them can often rest with just a few key people. (Owners may be jointly liable, severally liable or jointly and severally liable). If any of these die or suffer a critical illness, the remaining owners can be left with a large debt that they simply cannot pay. This is particularly the case with a personal guaranteed loan where the guarantor has been lost.
Business loan protection is fundamentally a life assurance policy taken out on the life of key individuals which will pay off the outstanding debt if something happens to them. The sum insured can be paid to either the business or to the lender.
