Running a business is one of life’s great journeys, but there is a lot at stake for any business owner: your financial security, your professional relationships and your livelihood.
By having a plan B, you can safeguard the financial health of your business, and that’s where business life insurance comes in.
In this guide we’ll take a look at what business life insurance means, and which policies you may want to consider for you and any business partners.
What is business life insurance?
The world is an unpredictable place, but business life insurance offers businesses a greater degree of financial certainty.
Essentially, it’s there to protect your business’s finances if something unforeseen – such as critical illness or death – happens to you, your staff or a senior stakeholder.
In reality, ‘business life insurance’ is a broad term that encompasses many different forms of business protection, as we’ll explore here.
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Types of business life insurance
If someone mentions life insurance for businesses, there's a reasonable chance they're referring to one of the following:
Key person protection
This helps safeguard a business against the financial effects of death, terminal illness (if life expectancy is less than 12 months), or a specified critical illness (if chosen for an extra cost at outset), of a key person while the plan is in place.
Following the death or diagnosis of a specified critical illness (if chosen for an extra cost at outset) of one of the business owners or senior shareholders, Share Protection can help the surviving owners purchase the deceased or critically ill person’s share, if a valid claim is made while the plan is in place.
Business loan protection
This is designed to help your business pay off any outstanding business loans in the event of a death, terminal illness (life expectancy less than 12 months) or diagnosis of a specified critical illness (if chosen for an extra cost at outset) of the guarantor of the loan, during the length of the policy.
Relevant life plan
This is a cost-effective way for the business to provide a life insurance policy for an employee. It does not count towards annual or lifetime pensions and is an alternative way for the employer to provide individual death-in-service benefits for employees outside of a registered group life scheme.
Business life insurance for sole traders
If you’re a sole trader, you’re eligible to set up business life insurance in the form of Key Person Protection, Business Loan Protection or a Relevant Life Plan is designed for you employees. If you’re just getting started as a business, read more about sole trader status on GOV.UK.
Life insurance for business partners
If you operate within a business partnership, you can set up Share Protection, Key Person Protection and Business Loan Protection ‘in trust’. With a Relevant Life Plan, employees of a partnership (including salaried partners) are eligible, as well as Limited Liability Partnerships.
Business life insurance for limited companies
Limited companies can take out a Relevant Life Plan for employees, which can include company directors, or Key Person Protection and Business Loan Protection on the life of a key person and Share Protection.
Business Life Insurance for Limited Liability Partnership (LLP)
An LLP can apply for a Relevant Life Plan for the employees, or Key Person Protection, Business Loan Protection on the life of a key person and Share Protection.
Which life insurance is right for my business?
Small businesses with less than ten employees won’t be eligible for our group life insurance schemes. A Relevant Life Plan is an alternative way to provide staff with a 'death in service' benefit. Insurance can also help businesses with continuity planning by covering the death or incapacity of an essential person. Options include Key Person Protection, Business Loan Protection and Share Protection
Want to learn more about business life insurance?
Life has a habit of throwing up surprises, but with business life insurance in place, you can give your business some peace of mind and continue focusing on what you do best.
Looking to take out a business life insurance policy? Our friendly team of financial advisers can offer you professional advice on which plan may be right for your business
Speak to a qualified financial adviser
If you'd like to discuss which type of business protection might suit your business, and for all other enquiries about business protection, email firstname.lastname@example.org or contact Legal & General on 0800 197 9208 (9am to 5pm Monday to Friday). Calls may be monitored.
Relevant Life Insurance
Relevant life insurance is a cost-effective way to provide life insurance to employees. Our guide explains how it works and what the benefits of a Relevant Life Plan are.
Key Person Insurance
Key person insurance, like our Key Person Protection, can help to protect your business against the financial effects of death, terminal illness (life expectancy less than 12 months) or a specified critical illness (if chosen for an extra cost at outset), of a key person while the plan is in place.