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The importance of business protection insurance

In the current economic climate it is becoming more and more popular for businesses to take out business life insurance, or business protection insurance, to insure the lives of key members of staff such as Directors, Shareholders and certain other employees with key roles in the organisation. Such an insurance policy can be put in place which will effectively pay out in the event of the death of a key member, enabling the remaining shareholders to evenly distribute the deceased’s shares out amongst them.

Realistically, bitter experience has shown that in the case of a ‘Close Limited Company’, where there are five or less Directors, when one of them dies the beneficiary of their shares may decide to sell them on to a competitor. Taking out business protection insurance can be crucial to avoid tricky situations like this, where rival businesses can acquire shares in a company when one of the shareholders dies and ultimately have the potential to take overall control of the company.

No business likes to think about losing a valuable member of staff, or the consequences, but forward thinking can save hardship and heartache later on. The specific type of policy recommended by Endsleigh for a ‘Close Limited Company’ is a Term Life Insurance Policy and this kind of policy is also recommended for business partners. Should the worst happen and you lose your business partner the policy enables the person or persons left behind to buy back the deceased’s share of the business, just like with a ‘Close Limited Company’.

In the case of employees with specialised skills or knowledge which makes them irreplaceable to the organisation, they are generally described as a ‘Keyperson’ and as such are likely to cost the business financially if they died in service. Endsleigh’s specialist advisers recommend businesses take out a Term Life Insurance Policy to cover against this type of financial setback too, after careful consultation about key workers in the company and their contribution to the organisation.

Employee arrangements can also be made with the company offering a group life insurance policy and paying the premiums as an employee benefit and incentive. The employee gets piece of mind for their families and the employer receives Corporation Tax relief on the premiums paid.

This was posted in Bdaily's Members' News section by Stephen Wright .