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Business protection – have you covered all the bases?

THERE are many things in life that you cannot plan for. If, however the worst should happen, shareholders and directors can ensure that they have the right protection in place for their business. There are a number of business protection solutions currently available, all designed to offer the best possible cover and hopefully, peace of mind. These solutions are often designed in such a way that any business affected by unfortunate circumstances could continue to operate with the minimal level of financial disruption. Two popular types of cover are:

Key Person Insurance

In general, Key Person Insurance is an insurance policy taken out by a business to compensate that business for any financial losses that may arise from the death or extended leave of a key person within the firm. Directors and employees with highly specialist skills or knowledge are key employees of the business they work for, so taking out Key Person Insurance to protect the company is a wise move to take.

Key Person Insurance can provide several benefits, including:

* Paying the costs of a temporary replacement

* Meeting the costs of recruiting a permanent replacement

* Covering the costs of death or incapacity of a key member of staff

The full scope of cover of Key Person Insurance will depend on the type of policy purchased and individual business circumstances. If you are considering taking out Key Person Insurance it is crucial you take advice on this matter.

Shareholder Protection

Generally, Shareholder Protection is an insurance policy taken out by a company to allow the remaining shareholders or members to remain in control following the death of a shareholder.

The business takes out protection policies for each of its shareholders and, upon death of a shareholder, the policy proceeds are either paid to the business or to a trust on behalf of the remaining shareholders. These funds can then be used to buy the shares of the deceased shareholder. In return, the deceased’s estate will receive the cash value of the shares.

If a shareholder dies with no Shareholder Protection insurance policy in place, their share in the business may be passed to their family. The shareholder’s family, however, may not have the necessary skills, experience or interest to continue in the business, which could be extremely damaging for the remaining shareholders. The remaining shareholders may not have the funds for the share purchase, which could lead to a sale of shares to a third party.

Shareholder Protection can also cover critical illness, as well as death.

Again, it is important to take professional advice to ensure that the any arrangements are set up correctly.

At Hawsons Wealth Management Limited, we have an expert team who can assist with all aspects of business protection. In particular, we have a great deal of experience in working with businesses to insure key individuals and shareholders.

If you would like to discuss this subject further we can arrange meetings at your own offices, or if preferred, at our office in Moulton Park. Contact Natasha Fathers by email at or by telephone on 01604 645600.

Hawsons Wealth Management Ltd is directly authorised and regulated by the Financial Conduct Authority. Hawsons Wealth Management Ltd is entered on the FCA register www.fca.org.uk/register/ under reference 586696.

Companies mentioned in this article

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