Business Protection
Protecting the people, finances and future of your business
Running a business means more than generating revenue. Your business may depend on key people, directors, shareholders, specialist employees, commercial borrowing and relationships that have taken years to build.
But what would happen if a key person died or became seriously ill? What if a shareholder passed away and their shares became part of their estate? Could your business continue making loan repayments if something unexpected happened?
Business protection is designed to help businesses prepare for these situations.
At Cambs Ely Mortgages, we help business owners across Ely, Cambridge, Cambridgeshire and throughout England understand the protection options available and how they could fit alongside their wider personal and business financial planning.
What is business protection?
Business protection is a broad term covering different types of insurance designed to help protect a company, its owners and its finances against significant events.
Depending on the business and its circumstances, this can include:
Key Person Protection
Relevant Life Cover
Shareholder Protection
Business Loan Protection
Life and serious illness protection for business owners and directors
The right solution will depend on factors such as your business structure, the people involved, borrowing, ownership arrangements and the financial impact of losing a particular individual.
There is no one-size-fits-all business protection policy.
Why might a business need protection?
Many businesses have significant financial commitments but relatively little protection in place.
A business might depend heavily on one director who manages key relationships. It could rely on a specialist employee whose knowledge would be difficult to replace. Perhaps the company has commercial borrowing that needs to continue being repaid.
For a smaller business, losing one individual can have a much larger financial impact than it might appear on paper.
Business protection can help provide financial support when the unexpected happens.
The objective isn't simply to insure a person. It is to consider what financial consequences their death or serious illness could have on the business and whether those consequences could be managed.
Key Person Protection
What is Key Person Protection?
A key person is someone whose death or serious illness could have a significant financial impact on a business.
This could be:
A company director
Business owner
Founder
Senior employee
Specialist
Sales director
Someone responsible for important clients or relationships
Key Person Protection can provide a financial benefit to the business if the insured key person dies or, depending on the policy, suffers a specified serious illness.
The purpose is to help the company deal with the financial consequences of losing someone who is particularly important to its success.
What could the money be used for?
Depending on the circumstances and policy arrangement, the proceeds could potentially help the business with costs such as:
Recruiting and training a replacement
Replacing lost revenue
Managing cash-flow pressures
Maintaining operations
Repaying certain business commitments
Replacing specialist knowledge
Supporting the transition to new management
The actual purpose and structure of the policy should be considered carefully when arranging cover.
Relevant Life Cover
What is Relevant Life Cover?
Relevant Life Cover can be an option for certain employees and directors who want life insurance arranged through their employer rather than taking a conventional personal policy.
It can be particularly relevant to company directors and business owners who operate through a limited company.
The company typically owns and pays for the policy, with the benefit intended for the employee's beneficiaries if the insured person dies during the policy term, subject to the policy terms and relevant legislation.
For some business owners, Relevant Life Cover can provide an alternative way of arranging personal life protection through their company.
Tax treatment can depend on the circumstances and the way the arrangement is structured, so appropriate tax advice should be considered where necessary.
Shareholder Protection
Protecting the ownership of your business
For businesses with two or more shareholders, it is important to consider what happens to the shares if one shareholder dies.
Without appropriate planning, the surviving shareholders could potentially find themselves dealing with the deceased shareholder's estate while the family of the deceased may want to realise the value of the shares.
This can create difficult financial and practical questions.
Shareholder Protection is designed to help provide a funding mechanism so that surviving shareholders can potentially purchase the deceased shareholder's shares, while providing value for the deceased shareholder's family or estate.
The arrangement is normally supported by appropriate legal agreements alongside the insurance.
Why shareholder protection matters
Imagine two shareholders each owning 50% of a business.
If one dies unexpectedly, the remaining shareholder may want to continue running the company, while the deceased shareholder's family may reasonably expect the shares to have financial value.
Where appropriate arrangements are already in place, insurance can provide the funding needed to support a share purchase.
Without sufficient funding, the surviving shareholder could potentially face difficult choices, including finding a substantial amount of money personally or attempting to finance the purchase elsewhere.
Shareholder Protection should therefore be considered alongside appropriate legal advice.
Business Loan Protection
Protecting business borrowing
Businesses often use borrowing to purchase property, equipment, vehicles, stock or to fund expansion.
Commercial mortgages and business loans can represent significant financial commitments.
If a business owner or key individual dies, the business may still have to meet those commitments.
Business Loan Protection can be designed to provide funds to help repay eligible business borrowing following the death of an insured person, subject to the policy terms and how the arrangement has been established.
This can help reduce the risk that a business or the remaining owners are left with a significant financial liability at an already difficult time.
If you are considering a commercial mortgage or business loan, protection should form part of the wider conversation rather than being considered separately.
Protection for Directors and Business Owners
Business owners often concentrate on protecting the business but overlook the importance of protecting themselves personally.
Your income may depend on the business continuing to operate.
You may also have:
A residential mortgage
Business borrowing
Personal guarantees
Family financial commitments
School or childcare costs
Savings and investments
Other dependants
This means personal protection and business protection can work alongside each other.
For example, a business owner might consider:
Life Insurance
To provide financial support for family or dependants if they die.
Critical Illness Cover
To provide a lump sum if they are diagnosed with a qualifying serious illness covered by the policy.
Income Protection
To provide an ongoing income if they are unable to work because of illness or injury, subject to the policy terms.
Business Protection
To help protect the company against the financial consequences of losing a key person or owner.
There can be significant overlap between personal and business financial planning, so looking at the overall picture can be important.
Business Protection for Limited Companies
Limited companies can have a range of protection requirements.
The company may have directors, shareholders, employees, commercial borrowing and significant financial commitments.
Depending on the circumstances, relevant protection arrangements could include:
Key Person Protection
Relevant Life Cover
Shareholder Protection
Business Loan Protection
Personal protection for directors
The appropriate structure will depend on the company's circumstances and the objectives of the individuals involved.
Business Protection for Partnerships
Partnerships can also face significant financial consequences if one partner dies or becomes seriously ill.
Depending on the partnership agreement and ownership structure, the remaining partners may need to consider what happens to the outgoing partner's interest in the business.
Protection can potentially provide funding to help deal with the financial consequences.
Because partnership arrangements can be legally complex, insurance should be considered alongside appropriate legal advice.
How much Business Protection do I need?
There is no universal amount of business protection.
The appropriate level could depend on factors such as:
The individual's contribution to business profits
Revenue generated by the individual
The cost of replacing them
Outstanding business borrowing
The value of their shareholding
The financial impact of losing key clients or relationships
Existing cash reserves
The structure and size of the business
The number of owners or shareholders
For Key Person Protection, for example, the calculation may consider the financial contribution of the individual and the potential cost of replacing them.
For Shareholder Protection, the value of the relevant shareholding may be a significant consideration.
For Business Loan Protection, the amount and structure of eligible borrowing may be central to the calculation.
The aim is to avoid both being significantly underinsured and paying for more cover than the business reasonably requires.
What affects the cost of Business Protection?
Premiums can depend on several factors, including:
Age
Health
Smoking status
Occupation
Lifestyle
Amount of cover
Policy term
Type of protection
Whether serious illness cover is included
Underwriting requirements
Business protection can involve more complex arrangements than a straightforward personal insurance policy.
The ownership of the policy, beneficiaries, purpose of the cover and tax treatment should all be considered carefully.
Business Protection and Tax
Business protection can have tax and accounting implications.
For example, the tax treatment of Relevant Life Cover, Key Person Protection and other arrangements can depend on the specific circumstances and how the policy is structured.
Business owners should not rely solely on general information when making decisions about the tax treatment of a particular arrangement.
Where necessary, we can work alongside your accountant or tax adviser so that the protection recommendation forms part of your wider financial planning.
What happens when you make a claim?
The claims process depends on the type of policy and the event giving rise to the claim.
For life cover, the policy will generally respond following the death of the insured person if the claim meets the policy terms.
Critical illness or serious illness benefits depend on the specific definitions contained within the policy.
Business protection arrangements can also involve additional considerations around ownership, beneficiaries, trusts, share purchase agreements and how proceeds are intended to be used.
This is why the policy wording and overall structure matter.
Business Protection and Commercial Finance
If your business owns commercial property, has business borrowing or is considering expansion, protection can be an important part of the wider financial plan.
At Cambs Ely Mortgages, we can also help with:
Commercial Mortgages
For businesses purchasing or refinancing commercial property.
Business Loans
For a range of business funding requirements, subject to lender criteria.
Commercial Investment Mortgages
For businesses and investors purchasing commercial investment property.
Development Finance
For eligible property development projects.
Considering borrowing and protection together can help you understand the wider financial commitments your business may be taking on.
Reviewing Existing Business Protection
If you already have business protection, it is worth reviewing it periodically.
Your business may have changed since the original policies were arranged.
Perhaps:
Turnover has increased
You have taken on additional borrowing
The value of the business has changed
You have employed additional key people
A new shareholder has joined
Existing shareholders have changed their ownership percentages
Your personal circumstances have changed
You have expanded into new areas
Existing policies no longer reflect your requirements
A protection review can help identify whether your existing arrangements still reflect the business you have today.
How we can help
Business protection can initially seem complicated because there are several different types of cover and the correct structure can depend heavily on the business.
Our role is to understand your circumstances, identify the risks that could have the greatest financial impact and explain the protection options available.
We can help you consider:
1. Your business
What does the company do and who are the key people?
2. Your financial commitments
What borrowing, liabilities and ongoing costs does the business have?
3. Your ownership structure
Who owns the business and what would happen if one owner died?
4. Your protection requirements
Which risks would create the greatest financial difficulty?
5. Suitable options
We can research the available protection solutions and explain the differences.
6. Implementation
Once you understand the recommendation, we can help arrange the appropriate policy, subject to underwriting and acceptance.
Business Protection Advice in Ely, Cambridge and Cambridgeshire
If you are a business owner, director, shareholder or self-employed professional, business protection is worth considering as part of your wider financial planning.
You don't need to know which type of policy you need before speaking to us.
We can start with the business, your people and your financial commitments, then work through the potential risks and available solutions.
Whether you run a small family business, a growing limited company or an established business with multiple shareholders, the right protection strategy can help give you greater financial resilience.
Start your Business Protection Enquiry
Tell us a little about your business and we'll arrange an initial conversation to understand what you are looking to protect.
GET STARTED WITH BUSINESS PROTECTION
You can also speak to us if you already have protection in place and simply want to understand whether it remains appropriate.