Business protection insurance services right now: Relevant Life Policy: A highly tax efficient way of offering life cover for company directors. Can now also cover illnesses with the optional employee significant illness cover. Written in trust to ensure tax free payouts. Key Person Income Protection Insurance: Long term illness of a key person can affect both the income of a business and also in many cases the employee also needs paying. Key person income protection can cover the business for loss of income whilst the employee is not working. Discover extra details at Executive Income Protection.
Tax Treatment of a Key Person Insurance Policy: Key person insurance is an important tool for businesses, ensuring the continuity of the business in event of sudden death or incapacity of a key employee. The tax implications for key person insurance, however, can be complex. In general, if the company meets certain criteria then it can claim corporation tax deduction on premiums paid. Payouts are typically treated as business revenue and are therefore taxable. However, this is not always the case so you need to ensure you take the right approach from a tax perspective. It is important to consider grossing up any payouts to make sure that the net figure still meets your needs after any applicable taxes are taken into account. We at have extensive experience in this area and can help ensure optimal tax outcomes when it comes to key person insurance policies.
The business itself can act as the proposer of this kind of policy if it’s set up in a Ltd format, or each individual owner can take individual policies if within partnerships and sole traders setups. It’s important for businesses to take this kind of measures into consideration when taking out large loans as it helps protect not only the people involved but also their investments should something go wrong throughout repayment period. Making sure everyone involved understands their responsibilities and is aware that there are ways to protect their finances should adverse circumstances arise will help provide peace-of-mind during stressful times.
However, it’s important to note that there are several different methods an adviser may use when valuing a business for Shareholder Protection. Cashflow is just one factor that can be taken into account, along with other financial metrics such as net assets, market value, or earnings potential. Ultimately, the valuation will depend on the unique circumstances of your business and what your Shareholder Protection insurance policy requires in terms of coverage. By working closely with an experienced adviser who understands these various methodologies and can help you navigate through them, you can ensure that your shareholders are protected while also maximizing the value of your company.
Family Benefits: If for example one of the shareholders owned 33% of a business and they were to die. To make things simple lets value the business at £3,000,000 and lets say their shares are worth £1,000,000. The spouse would normally be the one who would inherit the shares. But the remaining shareholders usually would not have spare £1 million as a cash lump sum freely available. So the chances are that they might offer the spouse a smaller sum than the shares are worth. Or another option is that the spouse could sell the shares to someone else potentially a competitor. Another option would be that the spouse could potentially keep the shares and get involves in the business. But usually the spouse would have other commitments and would not want to get involved in the business.
Business loan protection helps protect against unexpected risks and stress in critical situations. With this form of protection in place, the guarantor’s estate will not be held “personally liable” if something went wrong. This offers peace of mind knowing that their personal assets won’t be affected if something happens to them or another co-owner/director. Furthermore, creditors are also secured since they know that the debt will still be repaid even if certain events occur. Loan protection offers reassurance for everyone that involvement in a commercial transaction carries less risk when compared to unprotected scenarios.
Often called key-man insurance this type of policy is sometimes miss understood. It is important to ensure that the policy is set up in the correct manner using the right trusts or structure. There are also a lot of confusion and miss information on the tax treatment of these policies. The policy can be for life only or for life and critical illness cover . In another article we also explore key person income protection insurance. The death or illness of a key employee can have devastating consequences for a business and thus protecting a business from this should be an important part of protecting a business if the financial impact and help the business survive a difficult time. Discover extra information at Key person insurance.