Protecting your future business capabilities

As an individual involved in key decisions for your business, you need to be looking at ways to minimise risks to your business, especially in the current economic climate. At Independent James we offer impartial advice for all elements of Business Protection on offer.

The financial impact following the death or serious illness of key individuals can put a business at risk. These events often occur when least expected and can cause loss of profit, interruption to cash flow, disruptions to loan repayment and changes in shareholder control. In some instances the financial burden can be so great that the business is unable to continue.

Business protection in the form of life assurance can help businesses protect themselves against these eventualities and help ensure the continuation of the business. Such plans are relatively simple to effect and can be a cost–effective and tax-efficient way for the company to help safeguard its future. There are three main areas business protection plans cover – partnership or shareholder protection, keyperson protection and business loan protection.

Partnership/shareholder protection

A partnership can be an effective method of pooling resources and skills to the financial advantage of all concerned. However, it brings with it responsibilities and the possibility of financial burden, especially when one of the partners dies or becomes incapacitated. For a partner, his share in the business is likely to be his greatest financial asset so he needs to take steps to protect it, not only for the benefit of his family but also for the benefit of the other partners in order to help ensure the continuation of the business.

Business protection plans, based on a suitable legal agreement, can provide a simple and tax-efficient way to protect the interests of partners and shareholders.

Keyperson protection

Most businesses have an individual who is key to the success and profitability of the business, a ‘keyperson’. Many businesses would be severely affected if this person were to die suddenly, leading to problems such as a loss of confidence in the company, withdrawal of credit facilities or the need to train or recruit a replacement. In extreme circumstances, it could even lead to the bankruptcy of the company.

Keyperson protection can provide funds to help your business cover the financial impact of the death or serious illness of their keyperson.

Business loan protection

There are many reasons why a business may require cash, in the form of a loan – to buy stock, finance the cost of new equipment, or recruit a new sales team for example. Where a business has obtained a loan, it must consider not only how to meet any ongoing repayments but also how to finance full repayment should the lender call in the loan prematurely. A commercial lender will often make a business loan subject to repayment on the death of a certain, often key individual. Alternatively, if finance has come from a director’s loan account, and the director were to die, then their estate may demand repayment of the outstanding loan.

Business loan protection can provide a business with a cash sum that can be used to help repay a loan on the death or, if required, earlier serious illness of a specific individual.

The underwriting of all of the business protection policies can be particularly difficult and is not only concerned with an applicant’s health but also the financial ‘Insurable Interest’.

Please Contact Us for a company specific illustration.

For Buildings and Contents and Mortgage Payment Protection Insurance we usually offer products from a single provider.

Independent James are authorised and regulated by the Financial Services Authority – ref: 459851. This covers residential mortgages, general insurance and pure protection. We typically charge a fee for our advice, payable upon completion dependent on complexity of advice but on average £300.