Archive context: this guide was first published in November 2020. Its original tax-rate, pension Lifetime Allowance and percentage-savings examples are no longer suitable as current advice. HMRC says the Lifetime Allowance was abolished from 6 April 2024; other lump-sum rules now apply. Check current tax treatment with a qualified tax adviser before making a decision.
Business protection starts with a practical question: which people or ownership interests would create a financial gap if a death or serious illness disrupted the organisation? The answer depends on your business structure, existing arrangements and the policy offered.
1. Key Person Insurance
A business may consider cover linked to a person whose loss would materially affect revenue, operations or replacement costs. A policy can provide a benefit only when the insured event meets its terms. Whether death, a specified critical illness or another event is included depends on the cover selected. The recipient, amount, use of proceeds and tax treatment need to be checked for the actual arrangement; a tax-free company payment is not guaranteed.
Questions to ask include: who is essential to operations, what financial gap would their absence create, and what cover already exists? Read our Key Person Insurance guide.
2. Shareholder or ownership protection
Co-owners may consider how a surviving owner could acquire an interest after a death or specified illness. Insurance can form part of a plan, but a payout and any share purchase depend on the policy, ownership agreement, trust or other legal arrangements. The insured sum is not automatically equal to the value of a shareholding, and a family outcome cannot be promised in advance.
Discuss ownership agreements and valuation with legal and tax advisers as well as the insurance adviser. Our Business Protection guide outlines further questions.
3. Relevant Life Cover
Relevant Life is an employer-arranged life policy for an eligible individual, subject to insurer and policy rules. It may be considered alongside other employee benefits. Eligibility and the treatment of premiums or benefits are not universal; they depend on the arrangement and current tax law. This article does not promise a tax saving or a particular payout treatment.
The 2020 article referred to a percentage saving and a former pension Lifetime Allowance charge. Those figures should not be used for a current decision. See HMRC’s explanation of the 2024 Lifetime Allowance abolition, and ask an appropriately qualified adviser to assess current rules for your circumstances. Read our Relevant Life guide.
Next step
Start with the people, ownership structure and financial gaps you want to discuss. Explore Business Insurance or contact IM-Insured. Cover, availability, price, claim outcomes and tax treatment remain subject to the policy and individual circumstances; no instant quote or saving is promised here.
