A lot of people depend on you! Your staff, your clients, your business partners, your family and your suppliers. Don’t let them down, protect them and the future of your business against your death or illness.
Keeping the business in the right hands, well funded and clearing the debts that are secured on personal assets are the most common needs but a I provide a Full and Free analysis to keep your business safe.
Business protection for partnerships
For partnerships, the partners can take out a plan on their own life (or the life of an employee, as appropriate) subject to a Partnership Key Person trust for the benefits of the partners for the time being. Alternatively, if the partners are taking out cover for share purchase subject to business trusts, they can increase the cover under these plans. Limited Liability Partnerships, and partnerships in Scotland, can take out a plan in their own name on the life of each member/partner.
Business protection for companies
For companies, the company would normally effect the policy on the life of each key person/business owner. Alternatively (in the case of business owners), each business owner could take out a policy on their own life, but subject to a business trust for the benefit of the co-business owners.
Most Businesses have an overdraft, credit card and accounts with various suppliers. If the person they agreed to provide these to is no longer around, will they extend that trust to the remaining owners? Maybe not!
It is good to be prepared to meet these liabilities and be able to pay off any debts that may be secured on that owners private property.
If the deceased owner had retained profits in the company, the family will want this. Do you have sufficient cashflow?
Key person protection
In every office, shop or factory in the country there is a notice proclaiming that the employer has taken out insurance to cover accidents to employees at work. Every car or lorry owned by a business has to have at least the minimum level of insurance required by law. Most prudent business people will have arranged for insurance on the factory, office buildings, even on the desk at which they work.
But one valuable business asset is often left uninsured. Zurich believes that too few businesses have any insurance to cover the one eventuality that can literally mean the end of the business and the income it provides – the death or illness (including critical illness) of a key person.
Whether the business in question is a partnership, a Limited Liability Partnership, a company, or even a sole trader, it is likely to have an individual, or individuals, crucial to its continued activities and prosperity.
A key person is someone whose absence from the business through death, or the suffering of a critical illness or long term disability, would have a serious effect on the future profits of the business. Although the number of key employees will vary from business to business, there will usually be at least one.
In many small companies and partnerships, the founders are the life-blood of the business. They will have set up the business, be its managing director/ partner and chief source of business.
Relevant life policy
A relevant life policy is a term assurance effected by an employer on the life of an employee and funded by the employer.
A relevant life policy:
provides for a lump sum benefit payable either on death or the diagnosis of a terminal illness of the employee during their employment and before age 75
provides no other benefits and does not have a surrender value at any time
is effected by the employer subject to a special Relevant Life Policy Trust
is designed to meet the criteria for a 'single life' Relevant Life Policy set down in sub-sections 393B(4)(b) and (c) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).