Protect your business from unexpected shocks which could jeopardise its financial stability. Business Life Insurance provides a safety net for your company, against the financial effects of losing a key person. It's something that can get overlooked, but is a really important aspect of protecting your company. Find out more about the different types of insurance available, what they cost and if you need them. 


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What is Business Life Insurance?

Business Life insurance can provide peace of mind for your company, that if anything were to happen to a key person, your company would have the financial security it needed to keep going through a difficult time, surviving without that person.

The policy can provide a predetermined tax-free lump sum pay-out, to your company, in the event something unexpected happens, to a key member of the organisation. This usually can be a shareholder, a business partner, a key employee or any other important person you have insured. This would be paid out if the key person were to die and, in some instances, if they are diagnosed with a terminal illness when they are not expected to live longer than a year.

You could also add Critical Illness cover to the policy, which would offer the same lump sum pay out, if the insured person was to receive a critical illness diagnosis that is listed on the policy, such as cancer, a stroke, a heart attack etc.


What does Business Life Insurance Cover?

This type of business protection insurance is to protect the financial risks of the business, not to provide a benefit for the employee’s family or dependents. A plan that benefits an employee’s dependents, and works as an employee benefit, is usually referred to as a Relevant Life Plan within the industry.

There are three main types of cover to protect the business:

  • Key Person Insurance
  • Business Loan Insurance
  • Shareholder Protection Insurance

Types of Business Insurance

Key Person Insurance

Small businesses inevitably tend to rely heavily on specific key people. Losing one of these key people could have a serious impact on your business and it’s financial security. Key Person Insurance is intended to protect the business from this impact, by paying out a lump sum in the event of the death or terminal illness of one or more key people. This can cover a loss in revenue or profits, as well as the cost of replacing them and keeping the business on track.

Business Loan Insurance

The loss of an individual who has guaranteed a loan can be very serious for a business. If a business owner dies or suffers a terminal illness, lenders may have the right to demand that outstanding loans are paid back. These could be difficult to pay off at short notice and therefore if you have corporate debt, it’s definitely an option worth considering. Lenders and investors would often require a business to have this cover in place for any business loans.

Shareholder or Partnership Protection Insurance

If a business owner were to die or suffer a critical illness, their share of the business would usually pass on to their beneficiaries. Surviving business owners may well want to buy back that share of the business, to regain control and ensure the continued smooth running of the company. Many would not have the capacity to do this at short notice, without an insurance policy like this. A Shareholder Protection Insurance would pay out a lump sum if a business owner dies or suffers a terminal illness, to provide enough capital to buy back their shares in the business.


Do I really need Business Insurance?

Business Life Insurance is not a legal requirement, but if you were to lose a key member, without protection, it could put the company at risk of being declared insolvent. As we mentioned above, some lenders and investors would require a business to have this cover in place for any business loans.

Legal and General conducted research on Business Protection and found that: ‘Almost all businesses (99%) had at least one key person in their business. Almost 4 in 10 (38%) said they had 3 or more key people.’ Yet ‘More than half of the businesses did not have key person protection – in many cases it was not something they had ever thought about.’


How much is Business Life Insurance?

Business Life insurance premiums vary a lot depending upon the same underlying factors as for all Life Insurance:

  • The amount of benefit (ie the cash sum required to be paid out on the death of the insured person)
  • The duration the cover will last
  • If you include Critical Illness cover
  • The risk the employee poses of passing away (affected by age, medical history, smoker status etc)

Interestingly, in Legal and General’s research, when they asked business owners to estimate the cost of Life Insurance, 80% estimated the cost would be higher than the actual premium and on average they estimated almost 3 times the actual cost.

Our expert advisers are on the end of the phone ready to provide an exact quote based on your individual requirements.


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