Who is Royal London?
Royal London is the UK's largest mutual insurer, meaning they have no shareholders, and therefore their profits are only distributed amongst its members or reinvested to give better returns. This means for Royal London's members, they can often enjoy better value and higher customer service standards.
Today, a key part of Royal London's impressive portfolio of financial services is their business protection insurance, which is what we are focusing on in this article.
Royal London reviews
Royal London currently enjoys a rating of 4.7 out of 5 on the reviews platform Feefo, based on nearly 7,000 reviews, with 1,341 being written in the past year. When you consider the extensive range of services they provide, this impressive tally of independent reviews makes Royal London stand out from the crowd.
Business protection insurance
Royal London's business protection insurance can be used for several purposes, all of which are designed to cover someone's life; these include:
- Keyman insurance
- Shareholder protection
- Loan protection
Business protection from Royal London is available for partnerships (including limited liability partnerships), shareholders, sole traders and key employees.
What is Key person protection?
Royal London offers two options to limited companies, the life of another or own life in trust when it comes to key person protection. The options they provide for both limited liability partnerships, partnerships and sole traders all slightly differ, so if you aren't running a limited company, be sure to discuss these with your adviser.
As you might relate, business owners and directors take many steps to protect their business every day, from employing and retaining staff to insuring business assets. A commonly overlooked asset, however, is themselves and their teams. Any director should consider what might happen if they were to die or indeed suffered a critical illness. How would it affect the business? Could they be replaced? Would the surviving spouse or beneficiaries want to get involved? These are just some of the questions that company directors should ask themselves and indeed plan for.
Whether it's used to cover the life of a director or employee, key person insurance gives the company the reassurance that should death occur; the company will have sufficient resources to at least navigate the short term challenges it will undoubtedly face.
Relevant life insurance
Like others in the market, Royal London has a type of business protection called relevant life insurance, which is a death in service plan that is set up and paid for by an employer. You can think of relevant life insurance as a small business version of a group scheme, albeit more tax efficient. This type of cover is increasingly popular amongst small business directors and their employees, especially high-earning individuals, due to the taxation benefits.
Unlike a group life scheme, the lump sum benefit of a relevant life plan doesn't count towards an individual's lifetime pension allowance, nor do the premiums count towards their annual allowance.
Another significant benefit of a relevant life plan is that the premiums are usually not treated as a benefit in kind, meaning there is no income tax to pay. The same is true for the employee's national insurance contributions. As long as the taxman is satisfied that the premiums quality under the 'wholly and exclusively' rules, the employer can treat them as an allowable expense from a corporation tax perspective.
Assuming the benefit is paid through a discretionary trust, it'll be paid free of inheritance tax, as the pay-out won't be considered part of the employee's estate.
As you can see, the benefits of this type of policy are numerous, which is why so many company directors are taking out policies.
Shareholder protection insurance
Royal London's shareholder protection insurance is a form of insurance that ensures that surviving shareholders have the means to retain control of a business in the event of the death of a partner. Shareholder protection is often a vital part of a company's succession planning and therefore viewed as critical for businesses with several partners/shareholders.
A sudden death can cause significant disruption within a business, especially if they played an active role in the firm. What can complicate matters further is their shares being transferred to unknown beneficiaries, who may or may not be interested in the business. This can mean that the other shareholders suddenly have a new partner, who may have minimal knowledge of the company. This situation can lead to significant disagreement and undue stress, as the surviving shareholders try to raise funds to purchase the shares and the beneficiary tries to grapple with the situation on top of the death of their loved one. Shareholder protection insurance gives the surviving company owners the financial means to buy the shares from the deceased's beneficiaries at a pre-agreed price. This minimises the stress and potential for disagreement and ensures that everyone gets what they deserve.
A cross-option agreement will need to be created alongside your company's shareholder protection, which provides the legal basis for the surviving directors to purchase the deceased's shares from their estate easily.
How can you calculate the value of a business?
There are several ways that you can calculate the value of your business, each of which you can discuss with your accountant or financial adviser to make sure you choose the most appropriate method for your business:
- Multiple maintainable profits
- Dividend yield
- New assets
Critical illness protection
When we talk about business protection insurance, we primarily mean forms of business life insurance. Therefore, it stands to reason that many of the options you might consider for a personal life insurance policy are available for businesses too. Included within that is critical illness cover.
While Royal London's business protection will by default cover terminal illnesses (meaning those which have a prognosis of death within 12 months), other serious, but not immediately life-threatening diseases won't be covered. If you opt for critical illness cover and pay the associated additional premium, you will benefit from that enhanced protection. When you think about it, many potential illnesses could stop a key person or partner from working or exercising their duties. Critical illness protection ensures that if the insured should be diagnosed with one of many severe illnesses, the policy will pay out the benefit. It's important to note that once the benefit has been paid out, the policy will end, and if the individual then died, there wouldn't be a subsequent payment.
Why work with a business protection broker?
Currently, the only way to buy the products mentioned in this guide is through an intermediary. A business protection broker is an independent adviser who will help you choose the right policy for the best price. These are complicated products, which is why the insurers themselves have decided to leave it to independent financial advisers to sell them.
When you speak to one of our advisers, he or she will find out about your specific requirements and then provide personalised advice to suit your needs. The service business protection brokers offer is free of charge, so you benefit from an expert looking out for your best interests without a penny to pay.