Four factors to consider with business life insurance

This article explains the different aspects of business life insurance and why it’s something you should consider today.

If your business is your life, then why wouldn’t you want to keep it safe? Unfortunately, long-term illness and death are aspects of running a business, that many senior staff members, CEOs and business owners still neglect. Yet, if the worst should happen, the impact on the business can be crippling.

Business insurance is there to protect your organisation against events that can affect the running of the business. Working in a similar way to life insurance, your policy can be tailored to cover a key person, protect the payment of loans and cover shareholders too.

In this piece, claims assessor Harris Balcombe covers the different aspects of business life insurance and why it’s something you should consider today.

What is business life insurance?

Think of business life insurance in the same way as regular life insurance. Your life insurance policy is there to look after dependant family members or a spouse, by providing a lump sum pay-out in the event of a terminal illness or even death. Business life insurance works in the same way. By protecting the aspects of your business that rely on your input, you can ensure the financial stability of your business and employees.

There are several different aspects to consider with your policy in terms of who is covered.

1. Cover for a key person

While it may be difficult to define a ‘key person’ in your business, business life insurance policies will define a key person as an owner or senior member of the business. This is especially important for smaller business that rely on a key person for the wellbeing of the company and its employees.

You can cover a key person on your business life insurance

In the unfortunate event of losing a key person, this policy protects against profit loss or the build of debts. The lump sum can also cover the considerable costs incurred when hiring a new senior member of staff or replacement.

2. Cover for shareholders

Shareholders are a hugely important part of your business and could benefit from cover too. In the event of a shareholding directors’ death, this form of business life insurance provides remaining shareholders with the funds needed to buy shares from the deceased.

There are a few different categories in this policy. Some are designed to help a small number of shareholders while others allow businesses to take out a policy that covers the total cost of all their shares. Shareholder insurance is designed to make the financial transition between shareholders as smooth as possible.

3. Cover for business loans

If you’re incapacitated by a serious illness or if a senior staff member passes away with loans and debts still outstanding, it can be a serious issue for your business. Just like a life insurance policy, which you can take out to cover mortgages and other debts, insurance for business loans cover you should the worst happen.

This policy will secure your business against outstanding loans, rent or mortgages and keep your business afloat without the need to dip into savings or cash-in investments.

4. Cover for your employees

It depends on the size of your business but employers also have the option to take out a tax efficient policy for their employees. In the event of an employee death, a lump sum will be paid to the employee’s estate. Employees with a terminal illness are also protected during the length of the policy.

Ensure the life of your business

Like any insurance policy, you’ll hope to never use it. However, if the unthinkable happens to you, a senior manager or shareholder, business life insurance helps to ensure the financial stability you’ve worked so hard to create. Business life insurance is there to protect your people, profits and the future of your business.

See also: An essential guide to small business insurance

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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