Director Share Protection/ Partnership protection

Generally, on the death of a shareholding director, their personal representatives have the option to sell their shares in the company to the surviving shareholding directors. Equally, the surviving shareholding directors have the option to buy the deceased shareholding director’s shares from the personal representatives. If an option is exercised by either party, then the other party would be bound to buy or sell.

A shareholding director suffering from a diagnosed terminal illness that results in a valid claim, will have the option to sell their shares to the other shareholding directors. On payment of a valid terminal illness claim no further benefits will be payable and the policy will end. The agreement can include options on death/terminal illness and, if selected, critical illness. The shareholding directors should indicate in an agreement which events they wish to plan for, which should also be reflected in the type of policies that are being arranged.

A shareholding director suffering from a specified critical illness or disability that results in a valid claim under a life and critical illness policy, may have the option to sell their shares to the other shareholding directors. On payment of a valid critical illness claim no further benefits will be payable and the policy will end.

Relevant Life cover

As an owner of a limited company, you can take out a relevant life policy which covers your own life and will pay a sum to your family/dependants if you pass away or are diagnosed with a terminal illness. The policy is paid for by the business, which can mean many advantages compared to a normal personal life insurance policy. Most significantly, it can be tax efficient and result in savings of up to 50% on the premiums, depending on your tax band.

Do you want to provide a ‘death in service’ benefit to your staff? A relevant life policy can also cover the life of any of the company’s employees meaning the business can offer a benefit which can help attract and retain employees. This may be of interest if you don’t have enough employees to acquire a group life policy, or if you only wish to cover certain people within the business.

A relevant life policy is not subject to income tax or national insurance contributions as it is not treated as a taxable benefit in kind. A relevant life policy must only provide life cover, and no other benefit such as income protection.

Key Person Protection

Key Person insurance can be defined as an insurance policy where the proposer as well as the premium payer is the employer, the life to be insured is that of the same employer's key employee (Key Person) and the benefit, in case of a claim, goes to the employer. The `Key Person' here can be any employee, having a special skill set or substantial responsibilities, who contributes significantly to the profits of that organisation. It is not a special plan of insurance but just application of life insurance to fulfil a specialist need. 

The object of Key Person insurance is to cover the life of a Key Person for a monetary value so that in case of untimely death of such Key Person, the loss to the firm is recouped with monetary assistance (insured amount) received from the insurance company. As the name implies, the 'key person' is the key to the business' success; without him or her, the company would stumble.

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Executive income protection

This would pay a regular amount, if you are too ill to work, during a fixed term. The plan can be based upon you being too ill to continue your own job, any job you are suitable to do due to education or training, any job at all or it can be based upon certain activities of daily work / living.

The best definition is ‘own occupation’, as some of the other definitions could mean that you are too ill to do your job, however the policy will not pay a benefit. The sum assured will be based upon a percentage of your income, as an insurer would not want you to be better off while you are ill than being at work and you can choose for the payments to start any time after your employer stops paying you. The payments would normally continue until you either get better and return to work, or to the end of the term, which you would normally set as your intended retirement.

The premium and the sum assured can remain the same throughout the term, or it can be set to increase. The policy stops with no value at the end of the term. It is sometimes called Permanent Health Insurance, this is because once the plan has been set up, the insurer cannot cancel the policy, unless you stop the premiums, no matter how many times you claim on the policy.

"We have now worked with Saj for nearly five years, going through the sale of my business, investment of the proceeds and pension fund, rationalising our investments into a series of manageable pots and helping with inheritance tax planning. Saj has done an immense amount of research into available and relevant options, clearly understood our needs in terms of balancing risk with the need for regular income and security, but most importantly has shown immense patience – one of my early statements was that I will listen, but am unlikely to take more than 10% of the advice given! Sufficient to say that this percentage is now much higher and we have a more balanced lifestyle, as well as gradually securing our children’s future"

Dr JB - Chislehurst