Protection for business loans against the impact of death,
critical illness or terminal illness of key members of staff
who have a direct impact on the business's profits, such
as a business owner, director or employee with specialist skills.
Many firms borrow money to invest in their business or meet ongoing costs, but could your business manage the repayments if a key employee were to sadly pass away or were diagnosed with a critical or terminal illness?
Business Loan Protection could give your business a financial lifeline in the event of losing a key employee.
A key employee is any member of staff who has a direct impact on the business's profits. They could be a business owner, director or any employee with specialist skills.
What is Business Loan Protection?
Business Loan Protection with Legal & General can help your business pay an outstanding overdraft, loan or commercial mortgage, should a key employee die or be diagnosed with a terminal illness (with a life expectancy of less than 12 months) during the length of the policy. It could also pay out if they're diagnosed with a specified critical illness (if Critical Illness Cover is chosen at outset for an extra cost) during the length of the policy.
When you take out Business Loan Protection, your cover should reflect the amount your business owes in borrowed money. This can ensure that if you claim for a pay-out, you have sufficient cover in place to repay your business loans.
There can be serious implications for businesses that are unable to pay back loans, so Business Loan Protection can help to give your staff and stakeholders some peace of mind.
To discuss our Business Protection Plans, call us on 0800 197 9208.
Lines open 9am to 5pm Monday to Friday.
We may record and monitor calls.
Alternatively, email us on firstname.lastname@example.org
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How does Business Loan Protection work?
Business Loan Protection can be taken out on a 'level' or 'decreasing' cover basis. If a valid claim is made, the cash sum can be used to repay the businesses outstanding debt.
What documents are required to set up a Business Loan Protection?
The documents you submit when applying for Business Loan Protection depend on your business’s legal structure. If you’re set up as a Limited Company, Limited Liability Partnership (LLP) or Scottish partnership, you will need to complete a Business Protection application form, including the ‘ownership of benefits’ section.
The same is true if you operate as a sole trader, but in addition, you’ll need to submit a Discretionary Trust deed.
If you’re applying as a partnership, you’ll need to submit the Business Protection application form, as well as a Partnership Protection Trust deed.
Why consider Business Loan Protection?
Being unable to repay loans can be a serious problem for a business following the death of a key person.
Business Loan Protection could give your business greater confidence in planning its financial future.
How does Business Loan Protection work with tax and trusts?
Business Loan Protection and tax
A cash injection via policy proceeds can increase the value of the business. If the deceased key person was also a shareholder, the value of their estate would be increased. If the shares were passing to someone other than the spouse or civil partner, and business relief wasn't fully available, any Inheritance Tax liability may be increased.
Life policies used to protect business loans are not usually regarded as business income, because the money borrowed will be paid back rather than money that has been earned by the business. The premiums would not receive tax relief because the policy was taken out to protect the capital of the business.
Business Loan Protection and Capital Gains Tax
A Capital Gains Tax liability may arise in the event of the sale of an individual's share in the business due to a terminal or critical illness.
There may be other taxation implications, but this will depend on your individual circumstances. We would therefore advice that you consult your own legal or tax adviser before proceeding.
Business Loan Protection and trusts
A traditional partnership business in England and Wales can set up their Business Loan Protection in trust.
The policy would be owned by the trustees and would be written as an ‘own-life’ policy.
Speak to a qualified financial adviser
If you have any questions about Business Loan Protection, our team of expert financial advisers are available to offer professional advice and answer any queries you may have.
You can call us on 0800 197 9208 from 9am to 5pm Monday to Friday (note - we may record and monitor calls).
You can also email us at email@example.com to arrange a call back or book an appointment to speak to us.
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.
Shareholder Protection Insurance
Shareholder insurance can help avoid disruption to your business if one of the business owners dies, for example: a partner, director, or member. Find out more about Share Protection.