Business Related

Find Out More About the Financial Services We Offer

Most of the clients John Davies Financial Consultancy deal with have a business as their life blood – this fuels the other aspects of their lives and with their busy lives, many do not consider what might happen if their business partner was to pass away or become ill. We encourage all our clients to look at what their position would be the worst was to happen. Call us on 01752 896943 or alternatively, click the button below, and we’ll call you back.

Our Solutions

Keyman Insurance

This is designed to protect the business against financial loss in the event of the death, terminal, or critical illness (if requested) of a company director or partner. The death or a diagnosis of a terminal or critical illness of a key person can have a devastating effect on a business as well as personal life. A company may have to employ and train another member of staff to take over the running of that part of the business and profits and sales could reduce, with a knock-on effect of other staff having larger workloads.

It is basically a life assurance on a key member of staff. During the term of the plan, if the person insured dies or is diagnosed with a terminal or critical illness (if included), it will pay the sum assured to the employer. The plan is owned, and the premiums are paid by the employer. The premiums are a deductible business expense and can be offset against profits made to reduce a tax bill. If the company wanted to pay this lump sum direct to the employee, the employee would pay income tax on the proceeds.

Key man insurance can also be on an income protection basis.

The policy is owned by the company and could be open to creditors. If the key person leaves the company, you might still have to pay the premiums. There isn’t a benefit to the key employee and if they leave the company the policy can be cancelled.

Business Share Protection

This type of insurance is designed to cover the lives of business owners or directors of a company. If a business partner or director dies or is diagnosed with a terminal or critical illness (if requested) during the term of the plan, the sum assured will be paid to the remaining business partners or directors. If a plan is not in place, the partner or directors shares normally go to their family and they could sell those shares to someone else outside of the business. This type of insurance allows the remaining directors or partners to keep 100% control of the business. For example:

Mr Smith and Mr Jones are equal shareholders in a company and the company is worth £100,000. If either one of them were to pass away or be diagnosed with a terminal or critical illness (if requested), and a claim was made to the insurance company, their share would pass to their spouses.

If the company had invested in a Share Business Protection policy with a sum assured of £50,000, if one of them were to pass away or be diagnosed with a terminal or critical illness (if requested) the life assurance policy would pay £50,000 to the remaining business partners by way of a trust. This would allow the remaining partner or director to use the money to buy the shares from the family thus owning 100% of the company and keeping full control.

There are many ways this can be achieved depending on how your business is structured, whether it is a Limited company, LLP or a Partnership.

Life cover might be difficult to obtain for some shareholders, due to health, age etc. It might not be easy to value the company and you could be under insured, once a claim is made, as a result.

Relevant Life Plans

Relevant Life Plans offer a cost-efficient way for an employer to arrange life cover on the life of an employee, including directors of the company, with the benefits being payable to the employee’s family or financial dependants. Provided that the plan meets certain legislative requirements, the plan should be tax efficient for both employers and employees. Most Relevant Life Plans will assume that the policy will be set up in a Discretionary Trust at the start, with the employee’s family or dependants as beneficiaries. Relevant Life Plans should not be used for business protection purposes, e.g., to replace policies such as Keyman Insurance or Share Protection.

Tax treatment varies according to individual circumstances and is subject to change.