Business Owner & Professional Protection

If you run a company, a practice or a family business, your health and your life are part of the business in all but name. These are the protection questions worth asking before something forces them.

Key people

Think about who the business could least afford to lose for six months: an owner, a partner, a senior doctor or engineer, the person who holds the main client relationships. If that person died or could not work, the business might face lost income, the cost of finding a replacement, and nervous lenders or clients. Life cover on a key person is one way to give the business cash to steady itself.

Partners and shareholders

Where a business has more than one owner, it is worth asking what happens to a share if one owner dies. Without a plan, the surviving owners may find themselves in business with the deceased owner’s heirs, and the heirs may own a share they cannot easily sell. Many owners address this with an agreement, drafted by a lawyer, that sets out how a share will be bought and at what value, and with life cover to help fund it.

Loans and personal guarantees

Business loans often come with personal guarantees from the owners. If the guarantor dies, the debt does not disappear. Cover sized to outstanding borrowing can stop the debt passing to the family or forcing a sale.

Your own income

Self-employed professionals and owners usually have no employer sick pay to fall back on. Alongside life cover, it is worth looking at protection for serious illness, disability, accidents and hospital stays. On the Plans pages you’ll find, for example:

• PRULife Care Plus, yearly renewable critical illness cover that pays a cash benefit on diagnosis of, or surgery for, any of 36 listed illnesses;
• the Hospital Income Rider, which pays a daily cash benefit for each day of hospital confinement due to illness or injury;
• disability and accident riders, such as the Total and Permanent Disability (TPD) Plus Rider and the Accidental Death and Disablement (ADD) Rider.

Riders are optional add-ons attached to an eligible base plan, and availability depends on the plan chosen.

Practical points to settle

• Who owns the policy and who pays. Whether a business can own a policy on an owner or employee, and for what purpose, depends on Pru Life UK’s rules and underwriting. I’ll confirm the options for your situation.
• Who receives the money. The beneficiary should match the purpose: the business, the other owners, or the family.
• Tax and accounting. How premiums and proceeds are treated in the business accounts is a question for your accountant.
• Agreements. Buy-sell and shareholder agreements are legal documents and should be drafted by a lawyer.