Key person cover is open to any business owner. What would happen if you as the owner became seriously ill? Or do you have a key employee who is responsible for a large part of the business profits? This may be your main Marketing employee or top Salesperson. Even worse what would happen if you or they died. How would the business be affected? Here are the options for you:
- Business Loan Protection – If your business has a substantial amount of debt, including Director loans or commercial mortgages then a conversation should be had as to what would happen if you died or were seriously ill? Imagine if as a director you had loaned the company £50,000 for start-up costs, marketing, equipment etc. If you died before the company started making good profits then that money is lost and this could impact your family situation financially. Loan protection can mitigate this risk by proving the business a lump sum to cover that loan which can be delivered back to your family in a tax efficient way. You can set this up using Life cover or Critical illness or both.
- Key person cover – As a business owner and were struck down with a serious illness you may have personal Critical illness plan ensuring that you and your family are fine whilst you recover. However it is likely you would have to take a substantial amount of time off work. What would happen to your business during that time. Without your expertise the business may fold which could be devastating to your future financial situation. You may have a key employee that brings in a substantial amount of revenue. What if they were sick or even worse died? You can mitigate the risk by setting up key person cover for any employee you regard as key. This again can be set up on a Life cover or Critical illness basis or both, enabling you to use that money to recruit a replacement or just give the business a financial boost whilst it recovers.
- Shareholder protection – If you have several owners of a business even if you get along great, should one of you fall sick or pass away this can create tensions. You may be so poorly that you can’t contribute to the business. In this instance walking away from the business ay be the best solution but what if the Business can afford to pay you compensation for your shares in it? Also, if you passed away then your spouse/partner could inherit your shares. This is usually not desirable for the business or the spouse. Shareholder protection can make these transitions smooth and compensate each party for the loss again using either Life cover, critical illness, or both.