A quick overview of business protection
Business protection is a set of insurance policies designed to help a business survive the financial loss of a key person, owner, or shareholder due to death, critical illness, or disability. It ensures the business can continue trading, repay debts, or retain control of shares during a crisis.
You can read more about how it works in our complete guide to business protection.
Key features of business protection
Here is a rundown of the key components of business protection and the rules around it:
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Key Person Insurance: Pays a lump sum to the company to cover lost profits or recruitment costs if a crucial employee dies or becomes ill
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Shareholder/Partnership Protection: Provides funds for remaining owners to buy back shares from a deceased or critically ill owner, ensuring control remains with the business
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Business Loan Protection: Designed specifically to pay off outstanding business debts (like overdrafts or commercial mortgages) if a guarantor dies
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Relevant Life Plans: A tax-efficient alternative to "death in service" benefits, allowing the business to pay for personal life insurance for an employee/director
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Executive Income Protection: Pays a monthly benefit to the business to fund sick pay for a key employee who is unable to work
Eligibility criteria and other requirements
To qualify for business protection in the UK, your business must usually be a UK-registered entity (Limited Company, LLP, Partnership, or Sole Trader).
You must prove "insurable interest," meaning the business would suffer a genuine financial loss if the person insured died or became ill. The person insured typically needs to be between 18 and an upper age limit (often 70–75).
This table highlights the factors that impact a policy’s cost and likelihood of acceptance.
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Factor |
Impact & Key Insurer Checks |
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Health & Medical History |
Insurers check the key person's BMI and medical history. Serious conditions may lead to higher premiums or exclusions. |
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Financial Justification |
You must prove the cover amount is reasonable (e.g., 5x net profit). Excessive cover requests may be declined or reduced. |
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Smoking & Vaping |
If the key person has used nicotine in the last 12 months, premiums will likely double. |
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Occupation |
High-risk roles (e.g., offshore workers, manual trades) may attract higher costs or stricter terms. |
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Key Person's Role |
The person must be critical to turnover or profits. Insuring non-essential staff for high amounts may be rejected. |
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Business Type |
Sole traders, Partnerships, and Ltd Companies have different rules on tax relief and trust arrangements. |
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A Guide to Group Critical Illness Cover
Choosing a group critical illness cover planFAQs
It depends on the policy type. Premiums for Key Person Insurance are often tax-deductible for the business if the cover is solely to protect trading profits, but the payout is then usually taxable. Premiums for Shareholder Protection are generally not tax-deductible as they benefit the individual owners, not the trade itself. Relevant Life Plans are usually fully tax-deductible. You should always consult an accountant.
Protect your business today
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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