Building a business is no easy feat. Behind the shiny brand colours is often blood, sweat and tears, as many business owners give their heart and soul (and likely a few too many sleepless nights!) to growing their company. Sound familiar?

As many of us have learned the hard way, the road to success can be a long, winding one, with many unexpected bumps along the path. So, whatever part of the journey you’re on, whether you’re at the exciting beginning, the sometimes stressful middle or the profitable end, it’s important that you have the right insurance in place to protect the business that you’ve worked so hard to build.

Throughout this article, we will take you through all the different business protection insurance options available to you, and help you decide on the most compatible type for your business.

What is business protection insurance?

Fundamentally, business protection insurance is there to look after your organisation in a time of need and protect its finances in the sad eventuality that someone at the company passes away. It’s a life insurance policy designed for businesses, which pays out a lump sum of money to ensure minimal financial disruption should the unexpected happen.

Death is never a nice thing to think about, but it’s important for business owners to consider what a partner, shareholder, or employee death could mean for the future of the business. Some of the common ways business owners use pay outs from business protection cover, are:

Shareholder Protection – To protect business ownership and maintain control

Should one of the owners of a company pass away, it’s likely that their share of the business would transfer to their loved ones. Business protection insurance provides a pay out, should such an event occur, which would allow the surviving business owners to keep full control of the business by buying back the deceased’s share of the business, from their family.

Key Man Insurance – To protect profits

Often the loss of a business partner can result in a significant loss in revenue, especially if that person was integral to the running of the organisation. At such a time, a lump sum of money, courtesy of business protection insurance, can be exactly what you need to balance out a loss in finances and ensure your business bounces back financially.

Business Loan Insurance – To pay off business debts

Should a key partner pass away, and business income be hit, a company could suddenly struggle to handle its debts. An insurance pay out in this scenario could be a huge weight off the shoulders of the surviving owners – being used to cover debts which are sometimes even secured personally – adding to an already incredibly stressful scenario.

What is shareholder and partnership protection insurance?

The death of a partner or shareholder would come with its own unique set of consequences for your business – often involving the passing of their share in the company to their family. The challenge is then around control, as the deceased’s family could decide to sell their inherited share of the business to a third party, resulting in a loss of control for you and other surviving partners.

Investing in shareholder or partner protection insurance can remove this risk and ensure that you and surviving partners maintain control of your business, by providing a lump sum pay out to buy back the share of the business that would pass to the deceased’s family.

Shareholder protection insurance also acts to support the best interests of the family who receive a pay out to help alleviate financial stress during a difficult time.

What is key person insurance?

As a business owner, you have many valuable assets – for instance, key machinery and equipment – but arguably the most valuable components of your business are your people. The loss of a key employee can harm the financial future of the business in many ways, but this is why key person cover (also known as ‘key man insurance’) exists – to help your company cope financially should a particular person, who is vital for business success, sadly pass away or become terminally ill.

In short, key man insurance would pay out a lump sum amount of money if a person, key to the business, passed away. This cash injection can help to maintain profits, cover debt, rebuild customer confidence and even help fund the processes of recruitment and reorganisation.

The policy only covers the specific individuals you elect to cover, and the onus is on you to decide who qualifies as a key person, but it could be anyone who is an important contributor to the success of the business.

What is business loan protection?

Business loan protection insurance can be used to safeguard against the event of a business owner’s death (or if they suffer from a critical illness) when there are outstanding payments to cover, including loan repayments, director’s loans, venture capital loans, personal guarantees, or commercial mortgages.

A lot of businesses rely on loans to help their businesses grow, this is a very normal part of growing a company. However, the responsibility of repayment often rests on the shoulders of a few key individuals. Taking out business loan protection insurance can provide a safety net to help protect the financial security of your business if one of those key individuals were to sadly pass away.

It’s worth bearing in mind, before taking out this type of cover, that each key individual’s level of liability can vary depending on the particular loan. If we have lost you there, don’t worry – we have specialists that can help talk you through this and work out a policy that’s suited to the terms of the loan and your business.

Talk to us

Our team of professional advisers are on hand to help with any questions you may have about Business Protection. They can also provide quotations for cover and ensure everything is set up correctly, supporting you and your business every step of the way. Contact us for more information.

PLEASE NOTE: Grosvenor Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority do not regulate tax planning or cash flow planning. The value of investment can go down as well as up and you may not get back the original amount you invested. Tax treatment is dependent on individual circumstances and may be subject to change.