Find the best Business Loan Protection Insurance policy with free expert advice

Business Loan Protection is a type of insurance policy designed to help a business manage its financial obligations in the event of the death or critical illness of a key person responsible for a business loan. This policy provides coverage to repay or reduce the outstanding business debts or loans in such circumstances, easing the financial burden on the company or its stakeholders.

Key components and benefits of a Business Loan Protection policy typically include:

• Loan Repayment: In the event of the death or critical illness of a key person, the policy provides a lump sum payout that can be used to repay some or all of the outstanding business loans. This helps the business avoid financial strain or potential insolvency due to the loss of the key individual responsible for the loan.
• Continuity of Business Operations: The policy helps ensure continuity in business operations by safeguarding against potential financial difficulties that could arise from the sudden loss or incapacitation of a key individual.
• Protection for Business Assets: It safeguards the business assets that might have been used as collateral for the loan. This ensures that the assets are not at risk of being seized or liquidated to cover outstanding loan amounts.
• Customization: Policies can often be tailored to suit the specific needs of the business. Coverage amounts, term lengths, and other policy features can be adjusted based on the loan amount and repayment schedule.
• Tax Benefits: In some cases, premiums paid for Business Loan Protection policies may be tax-deductible as a business expense. The tax implications may vary based on the jurisdiction and individual circumstances, so it's advisable to consult a tax advisor for details.
• Peace of Mind: Having a Business Loan Protection policy in place provides peace of mind to business owners, lenders, and stakeholders, knowing that the financial obligations of the business are protected in the event of an unexpected loss.

When considering a Business Loan Protection policy, it's crucial for businesses to assess their loan obligations, the roles of key personnel tied to those loans, and the potential impact of their absence due to death or critical illness. This assessment helps in determining the appropriate coverage amount and policy features needed to adequately protect the business.

As an insurance adviser, it's important to thoroughly understand the specific needs and circumstances of each business client to recommend the most suitable Business Loan Protection policy that aligns with their requirements and provides comprehensive coverage for their loan obligations.

If you’re a company director and you have life insurance in place to protect your family, you could be paying more tax than you need to.

Relevant Life Policies are a way of providing death-in-service benefits on an individual basis no matter how small your business is. They are not classed as a ‘benefit in kind’ so no tax is payable on the premiums. In most cases the benefits can be paid free of inheritance tax provided the benefits are payable through a discretionary trust.

What are the benefits?

• Although the company pays the premiums, they are not normally assessable to income tax on the employee as a benefit-in-kind. This can be a significant saving, particularly for a higher-rate taxpayer
• Unlike a registered group scheme, the benefit will not form part of the employee’s annual or lifetime pension allowance

What are the advantages of using a discretionary trust?

• There are restrictions as to whom the benefits of a Relevant Life Policy can be paid, but the use of the trust is the most practical way of ensuring these restrictions are met. The beneficiaries who could be included are usually family members and dependents.
• Having benefits paid through a trust ensures they cannot be taxed as part of the company’s trading income, nor do they form part of the company’s assets.
• The trust is discretionary, allowing trustees to be flexible as to whom they pay benefits. However the employee can advise the trustees of his or her intentions by completing a nomination form. Although this is not legally binding on the trustees, it helps to guide them. The trustees will normally be the directors of the company.
• Using a trust also ensures that in most circumstances benefits are paid free of both income tax and inheritance tax.
• The maximum cover differs across insurers: for example, Bright Grey offer a figure up to 15 times the employee / director’s remuneration. This can include salary, regular dividends paid in lieu of salary and any benefits in kind.

Are there any limits to the cover I have?

• The legislation does have some limits to qualify for the tax concessions, and to ensure these are met, it requires that:
• The cover must be paid in a single lump sum before the age of 75.
• Only Death & Terminal Illness benefits can be provided.
• Benefits must be paid through a discretionary trust.
• Beneficiaries are normally restricted to family members and dependents.
• The maximum amount of cover allowable can depend on your remuneration and age.

Who are relevant life policies suitable for?

• Company Directors that would like their company to pay for their life cover and offset the premiums against corporation tax
• Small businesses that do not have enough eligible employees to warrant a group life scheme.
• Directors of small limited companies that may be thinking of putting Key Person cover in place so that their company can pay the premiums on their cover
• High-earning employees or directors who have substantial pension funds and do not want their benefits to form part of their lifetime allowance.
• They are not suitable for the self-employed or equity partners, although their employed staff could be covered.