Business Protection

Q: What is Key Person Insurance?

Key Person Insurance is a type of business protection that provides a financial payout if a crucial employee, such as a director or key team member, dies or becomes critically ill. This helps cover lost revenue, recruitment costs, or other financial impacts on the business.

Q: How do you decide who the 'Key Employees' are?

Key employees are those whose skills, knowledge, or leadership are vital to business success. This could include founders, directors, top salespeople, or specialists whose absence would significantly impact operations and revenue.

Q: Does Key Person Insurance cover illness as well as death?

Standard Key Person Insurance typically covers death and terminal illness. However, businesses can add Critical Illness Cover, which provides a payout if the key employee is diagnosed with a serious medical condition like cancer, a stroke, or a heart attack.

Q: What is Relevant Life Insurance?

Relevant Life Insurance is a tax-efficient life cover for company directors and employees. Paid for by the business, it provides a lump sum to the employee’s family if they pass away during the policy term, offering personal protection through a business expense.

Q: Who can take out Relevant Life Insurance?

Relevant Life Insurance is available to UK limited company directors and employees. The policy is owned and paid for by the business, but the payout goes to the employee's beneficiaries. Sole traders and partnerships cannot take out this cover for themselves but may offer it to employees.

Q: How is Relevant Life Insurance tax efficient?

Relevant Life Insurance is tax-efficient because the premiums are paid by the business and are usually classed as an allowable business expense. This means potential corporation tax relief and no National Insurance or benefit-in-kind charges for the employee. The payout is typically tax-free when placed in a trust.

Question 1

What is Income Protection Insurance?

Answer

Income Protection Insurance ensures financial security by providing up to 70% of your salary if you're unable to work due to illness or injury. With affordable premiums, this policy helps cover essential expenses, reducing financial stress during tough times. You can choose between short-term coverage (up to two years) or long-term protection (payments until retirement), with customisable options to fit your needs and budget.

Question 2

Why do I need Income Protection?

Answer

Losing the ability to work can put a serious strain on your finances, making it difficult to cover essential expenses. Income Protection Insurance provides peace of mind by replacing lost income due to illness or injury, helping you maintain your standard of living with minimal disruption. It’s especially beneficial if you're self-employed, don’t receive full sick pay, or lack savings or other sources of income. Payments can help cover rent or mortgage costs, household bills, daily expenses, childcare, debt repayments, and even leisure activities, ensuring financial stability when you need it most.

Question 3

I get 3 months full sick pay from work. Do I still need Income Protection?

Answer

Yes, income protection can still be valuable. Many policies allow you to delay payments until after your employer’s sick pay ends, meaning your cover kicks in just when you need it. If your illness or injury lasts longer than three months, your income protection can continue supporting you long after your sick pay stops.

Question 4

I have a pre-existing condition. Can I still get income protection?

Answer

Yes, you can still apply for income protection, but the cover may vary. Some insurers may exclude pre-existing conditions, while others may offer cover at a slightly higher premium. It’s always worth speaking to an adviser who can help you find the best provider for your situation.

Question 5

What does Income Protection not cover?

Answer

Income Protection Insurance is designed to cover loss of income due to illness or injury, but it does not provide coverage for certain situations. These include pre-existing conditions, unemployment, redundancy, self-inflicted injuries, or illnesses related to alcohol or drug abuse. It also does not act as life insurance, meaning it won’t provide payouts in the event of death. Understanding these exclusions ensures you choose the right coverage for your needs.

Question 6

How does Critical Illness Cover differ from Income Protection?

Answer

Critical illness cover provides a one-off lump sum if you're diagnosed with a serious illness covered by your policy, such as cancer or a heart attack. In contrast, income protection pays out a regular monthly income if you're unable to work due to illness or injury. Income protection helps cover ongoing living expenses, whereas critical illness cover provides an upfront financial cushion. Many people choose to have both for comprehensive protection.

Question 7

How much does Income Protection cost?

Answer

The cost of income protection depends on several factors, including your age, occupation, health, the level of cover you choose, and the waiting period before payments start. Policies can be tailored to fit different budgets, and we can help you find the best option at an affordable price. Get a free quote today to see what works for you.

Question 8

What if I stop working? Is my policy cancelled?

Answer

If you stop working, your policy may no longer be valid since income protection is designed to replace lost earnings. However, some providers offer flexibility, such as pausing or adjusting your policy. If your circumstances change, it’s best to contact your insurer or adviser to discuss your options.

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