There are four primary types of policy which are classed as business protection insurance:
- Relevant life insurance
- Keyman insurance
- Shareholder protection insurance
- Executive income protection insurance
Relevant life insurance, keyman insurance and shareholder protection are all forms of life insurance, with executive income protection being the only outlier.
Relevant life insurance is a type of business protection that has been created to allow small companies to provide a death-in-service benefit to their employees. With group schemes, often reserved for companies with 5 or more employees, there was a need to offer smaller businesses a similar type of product. Relevant life insurance has several advantages over group schemes, not least that it tends to be more tax-efficient. We’ve written several guides about this popular form of life insurance, so be sure to read some of those if you or your employees are looking for a death-in-service benefit.
Keyman insurance is another type of life insurance, but instead of the benefit (cash lump sum) being paid to the deceased’s beneficiaries, it’s paid to the company instead to help mitigate their loss in a business sense. Many small businesses have team members who are vital to operations and their death would significantly impact the day to day running of the company, not to mention profitability. Keyman insurance obviously can’t replace that key individual, but it can help keep the business running and support it through what would be a difficult time.
Shareholder protection insurance as the name suggests is a form of life insurance designed to cover the life of one or more shareholders. The primary purpose of shareholder protection insurance is not to provide any form of business support, like keyman insurance, but to make it possible for the surviving shareholders to buy the shares of the deceased from whoever inherits them. Shareholder protection insurance alongside a cross-option agreement ensures that a viable succession plan is in place, should the worse happen.
Executive income protection (EIP) is the only type of business protection that isn’t a form of life insurance. The name is fairly accurate, albeit many people that take out EIP wouldn’t consider themselves to be an “executive”. Again, this is a product that is mainly aimed at relatively small businesses and is often taken out by owner-operators and contractors who run their own limited companies. Executive income protection insurance can provide several advantages over taking out a personal policy, not least that it’s paid for by the company and is tax-deductible.
It’s important to point out that currently, you can only access business protection products via a broker. That may change in the future of course, but for the time being, you will need to speak to one, rather than going directly to an insurer. Fortunately, it’s beneficial to speak to a broker anyway, as they are in the best position to offer you advice and, importantly, ensure that you get the right policy for you and your business. Here are the top benefits of working with a business protection broker:
1, Brokers are independent
As business protection brokers are independent and aren’t tied to a single insurer, they’re able to give you an objective view of the whole market and help you find the best policy for you. During your initial conversations, they will take time to understand your requirements and then not only help you choose the right type of protection, but also the best provider and at the best price.
2, It’s a free service
You don’t need to pay a business protection broker for the service they provide. While they work in your best interest, they’re paid by the insurers. Despite this, they are still independent companies and aren’t tied to a single insurer, so you get expert advice, free of charge.
3, Business protection brokers are product experts
Most brokers are FCA approved independent financial advisers and they’ve spent many years amassing their detailed product knowledge. With so many providers in the market and products changing all of the time, it’s incredibly useful to have a broker on hand. At Business Protection Hub, all of our advisers have worked in insurance for over a decade, and most can offer advice not only for you as a business, but for you personally as well.
4, You’ll get the best price by using a broker
As we’ve mentioned, you can’t currently go directly to providers to get their business protection products, but even if you could, it pays to compare all of the insurers to make sure you don’t overpay. A business protection broker will compare all of the UK’s leading providers on your behalf, so you know that you are not only getting the right policy for you but also the best price.
5, Peace of mind
The types of policies that business protection brokers advise on are typically very important to a company. The last thing you’d want is to be unsure about the level of protection you have. Your business broker will work with you so not only you have the right level of cover, but also that you fully understand the protection you have in place, ensuring there are no nasty surprises down the line.
6, Help to choose the right product
Business protection insurance can be a fairly complicated topic, especially when you start considering things like cross-option agreements for shareholders and lifetime pension allowances for relevant life insurance. The complexity of these products is one of the reasons why you can’t get them directly from the providers; their staff simply don’t have the knowledge to advise you - you need an independent financial adviser.
7, A business protection broker will save you time
Closely linked to the fact that a business broker will help you choose the right product, they’ll also save you a considerable amount of time. The journey to finding the right policy and indeed configuring is often a complicated one, and by leaning on the skill and knowledge of a broker you’ll ensure that you get to the destination as quickly as possible.
Working alongside business protection brokers at Sandbourne, Business Protection Hub provides you with a vast array of information, designed to help you get the best understanding of these products. As soon as you’re ready to speak to someone about your specific needs, please complete our quote form, or call us and we’ll connect you with an FCA authorised business protection broker who will be your single point of contact throughout the process. Not only that, but the business protection adviser you speak to will be on-hand in years to come, offering annual reviews and ensuring that you always have the right cover at the best price.