- Business loan protection
- Share protection
- Key person replacement or profit protection
- Relevant life plan
Advice for business protection often also includes a recommendation to consider a relevant life plan (RLP).
These provide individual “death in service” cover for the benefit of an employee’s family.
Relevant life policies are paid by the business and can be a tax-efficient way of providing personal life insurance for key employees and company directors; they are often used when the business is not large enough to qualify for a group death in service scheme, or may be used to top up existing scheme cover.
Neither one nor the other
The common factor with all these ideas is that they cover key individuals within the business.
The cover closest to business protection comes from personal life insurance, critical illness cover and group protection policies.
There are two key distinctions, however. The first is that, with the exception of individual life insurance policies, the cover is primarily designed to protect the business, to enable it to continue trading and safeguard its future in difficult circumstances.
Whereas group or individual insurance for life and critical illness (or income protection) provide cover for those solely affected or their loved ones, business protection provides financial support for those left to keep the business running.
The second key difference that separates business protection from personal protection is that the business pays the premiums.
For key person cover, loan protection, relevant life plans and some (but not all) shareholder protection policies, the business takes the cover out on the life of the employee and is responsible for paying the premiums.
This is particularly important for relevant life plans.
Relevant life plans are paid for by the business and can be claimed as a business expense, they are also not classed as an employee P11D benefit.
For example, if a director is either paying for life cover personally from taxed income, or instead uses the business to pay for it under a P11D benefit-in-kind, relevant life cover may offer an alternative tax-efficient way of paying for personal life insurance.
For an annual premium being paid out of the employee's net pay of £1,000, a policy could save the employee and company up to £769.95 in tax and national insurance contributions if written as an RLP.
The main differences between business protection and individual or group protection is that the policies are there to protect the business, enabling it to continue trading and to safeguard its future in difficult circumstances.
Whereas, with group and individual protection the cover is for the benefit of the person affected or their loved ones; business protection provides a useful financial cash injection to help keep the business running.
