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Protection
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Overview
Life and Health Insurance
For all forms of cover we are able to approach the whole of the market to establish the best possible rates.
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Temporary Life Insurance
Life Assurance which provides coverage for a limited period of time is called Term Assurance. If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is often the most inexpensive way to purchase a substantial death benefit.
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Whole of Life Insurance
Is a life insurance policy that remains in force for the insured's whole life. The younger that you commence a Whole of Life policy, the cheaper it is likely to be.
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Critical Illness
Is an insurance product, where the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed in the insurance policy.
The policy may also be structured to pay out regular income and the payout may also be on the policyholder undergoing a surgical procedure, for example, having a heart bypass operation. Critial Illness is becoming less popular due to the complicated terms that apply and the difficulty in making a claim, however there are still providers that offer the cover.
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Terminal Illness
Pays out a capital sum if the policyholder is diagnosed with a terminal illness from which the policyholder is expected to die within 12 months of diagnosis. This cover is not sold as a stand alone insurance but in connection with other cover such as Term Assurance. Some providers offer Terminal Illness with their Term Assurance automatically.
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Key Man Insurance
An insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of the member of the business specified on the policy. The policy’s term does not extend beyond the period of the key person’s usefulness to the business. The aim is to compensate the business for losses and facilitate business continuity. Key person insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy. An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer is likely to suffer in the event of the loss of a key person. The employer pays the premiums and also received the benefits on the death of the employee.
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Shareholder Protection Insurance
There are three methods to write shareholder protection.
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Own life policy held under business trust
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Life of another policy
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Company share purchase
Life of another policy This method is usually used where there are only two shareholders and it is unlikely that there will ever be more shareholders. Each shareholder applies for a policy on the life of the other shareholder equal to the value to their shareholding within the business. Each of the directors pay the premiums themselves otherwise if the company paid the premiums, it would be seen as benefit in kind and subject to income tax and national insurance. On the death of a shareholder the proceeds are paid to the policy owner who then uses these proceeds to buy the deceased shares from their family or estate. The surviving director thus owns the company outright and the decreased shareholders estate has been dealt with quickly. The reason why this method is only ever popular with companies with two directors is that only two policies need to be taken out. If there were three directors, 6 policies would need to be taken out, and four directors would need 12 policies. Another disadvantage to this method is where there is a significant age gap between directors. The costs of a policy for a a director in his 50’s will be higher than a director in his 20’s.
Company Share Purchase This can be a fairly complex process due to company law and tax procedures and usually involves the help of tax advisers and corporate lawyers. Essentially the company buys back the shares from the deceased shareholder rather than the surviving shareholders buying them. The company applies for policies on the shareholders equal to their shareholding values. The policies are usually written until retirement age. The company pays for the premiums and therefore receives the proceeds in the event of a claim. As the company pays for the premiums corporation tax relief isn’t available because the policy isn’t set up to meet the loss of profits on death. The proceeds of the policy will be free of corporation tax as they are for capital purchase.
Own life policy held under business trust Each shareholder has their own policy held under a trust for the value of their shares. The policy is arranged as a fixed term or up until the point of retirement. If a shareholder dies or becomes critically ill then the other shareholders would use the funds from the trust to purchase the shares of the critically ill or deceased shareholders estate. Those shares are then split equally between the remaining shareholders. In order to make sure that the proceeds are used to buy the shares the company must either change their Articles of Association or set out a seperate agreement. This is usually a cross option agreement.
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Group Life – Death in Service
Term Assurance cover paid for by the employer, with the benefits paid out to the individuals nominated beneficiaries, subject to approval. A form of providing benefits to employees.
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Group Private Health Insurance
Health Cover paid for by the employer for the benefit of its employees.
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