Business Loan Protection

Quite often a business has a loan associated with it. Either in the form of a loan, commercial mortgage or an overdraft facility and more often than not the loan is personally guaranteed by one or all of the directors.

In the event of death the loan maybe recalled immediately and without any protection the business could be unable to repay the loan. The Key Persons family could then be directly affected as the proceeds of the estate could be called upon to repay the debt.

A loan protection policy allows the business to take out a policy on the Key Person and in the event of their premature death (or diagnoses of a critical illness if this option is included) the business is provided a lump sum to repay the loan. A fairly simple low cost product but can have a significant impact on both the ability for the business to carry on trading and also the financial security of the deceased family.

Here are some of the options available:

  • Covers loans, mortgages and overdrafts
  • No maximum sum insurable
  • Cover for life and/or critical illness
  • Available to limited companies, partnerships and sole traders
  • Ensures the business is still able to carry on trading

Protect your business loans if a shareholder or a business partner dies or suffers a severe illness


Shareholder Protection / Share Option Agreements

When a co-owner of a company dies unexpectedly, their shareholding will be passed on as part of their estate in the usual way. If their beneficiaries choose to sell the shareholding, there is no guarantee that the new buyer will want to run it in the same way as the deceased.

In these circumstances it may be in the best interest of the business for the remaining shareholders to buy the shares. However most companies do not plan for such an eventuality. The same need arises when the co-owner becomes seriously ill and is unable to return to work. Although shares do not pass to beneficiaries, it may be desirable for the co-owners to have options to buy or sell the shares.

Share purchase protection covers one nominated individual who can be a partner or an employee. If they die or are diagnosed with a terminal or critical illness, a lump sum is payable either on death or shortly after the diagnosis of a disease.

Some of the options available:

  • Cover for death and/or critical illness
  • Can allow the business to carry on trading
  • Allows remaining shareholders control
  • Share option agreement advice
  • Avoids the deceased family becoming involved with the future running of the business