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Business Protection

Business Protection FAQs

We get a lot of questions regarding Business Protection. So to help, we've put together a FAQ covering the most common queries.


Key Person

What is a key person?

A key person is an individual who is vital to the success of a business. The loss of a key person’s specialist skills or expertise could severely impact the business. It could be the business owner, director, sales person or any employee who would be difficult and costly to replace.

Key Person cover is sometimes referred to as key man insurance.

What is Key Person Cover?

Key Person Cover is life insurance with the option to include critical illness cover and protects a business against loss of profit on the death of a key person, or to pay a debt or loan where repayments would be affected by the loss of a key person.

How much cover should I recommend?

This should be based on the level of profit that is expected to be lost if this person died or suffered a critical illness. Our Key Person calculator can help set an appropriate amount of cover if the policy is taken to cover profit or debt.

How is the policy set up?

This depends on the trading style of the firm setting up the policy. For limited companies and limited liability partnerships the firm would normally be the applicant and would own the policy and pay the premiums. For partnerships, one of the partners would normally own the policy with any proceeds paid via trust to all the partners.

See our guide to setting up Key Person by company.

Can I recommend Key Person Cover to a sole trader?

A sole trader can take out Key Person cover on the life of a key employee. A sole trader can also take out Key Person cover on their own life, with benefits paid under trust to their next of kin. This will help pay trading debts or assist trading activities in the event of death or critical illness.

How are the premiums and proceeds treated for tax purposes?

Unfortunately the tax treatment of Key Person Cover premiums and proceeds is not straight forward. In some cases, the premiums will be treated as an allowable expense and any subsequent proceeds are likely to be treated as a trading receipt. However, if the premiums are not treated as an allowable expense it does not automatically follow that any proceeds will not be considered a trading receipt. The guidelines relating to this are known as the Anderson Principles, for more information, please visit our tax treatment pages or contact your usual LV= protection consultant.


Share Protection and Partnership Protection

What types of businesses can apply?

Share Protection is for limited companies and Partnership Protection is designed for partnerships and limited liability partnerships.

How do I work out the level of cover to recommend?

We have designed a number of Business Protection tools and calculators to make this as simple as possible for you, all of these can be found in our tools section.

One of the shareholders is uninsurable or doesn't want any cover?

Potentially, a normal shareholder protection scheme can operate as long as two shareholding directors are involved. However, it is designed to be a reciprocal arrangement with all shareholders (or partners) taking part. Setting up an arrangement where one or more of the business owners does not take part can lead to unintended consequences (such as a surviving participant taking a majority stake in the business).

What is a cross option agreement?

Also known as a double option agreement, this is a legally binding contract between each business owner which outlines what would happen to their share in the company, if one of them dies. It gives the surviving business owners the option to buy the deceased owner’s shares, and the estate the option to sell them.

Does the company get re-valued at claims stage?

The amount of cover is set at outset and company value at claim stage would not normally affect this amount. For this reason, it is important that advisers regularly review the level of cover in place and encourage business owners to take action if required.

What is premium equalisation?

Premium equalisation makes sure that all participants in a Share or Partnership Protection arrangement pay a commercial amount relative to the benefit they or their family is likely to receive. Premium equalisation is a necessary part of any Share or Partnership Protection arrangement. You can use our Premium Equalisation Calculator or contact your usual LV= protection consultant for more information.


Relevant Life Cover

Can a director of a limited company have Relevant Life Cover?

Yes, cover is available for all employees, as long as the company pays them a salary.

My client is a sole trader; can I recommend cover for them?

No, they can take out cover for any of their employees, but not themselves.

Can I recommend cover to my self-employed clients?

No, Relevant Life cover is only available for employers to insure their employees.

Can I add critical illness cover to a Relevant Life Cover policy?

No.

Can cover be written on a reviewable premium basis?

No. We offer guaranteed premiums only, which include level or inflation-linked options.

What is the application process for a Relevant Life policy?

The application can be submitted online or by a paper application.

Why Relevant Life Cover rather than a Life Insurance policy?

We have developed a Relevant Life Cover calculator to help you decide if Relevant Life Cover is right for your client. The calculator helps demonstrate the potential savings your client could make when arranging Relevant Life Cover versus ordinary life insurance cover.

Are all Relevant Life Cover policies written in trust?

Yes, all policies must be written into a discretionary trust and a hard copy sent to our Exeter office.

Find out more about trusts.

What happens if an employee leaves the company?

There are a number of different options available, one of which is that if the individual wants to continue their cover, we can give them a new own life policy on the same terms as the existing contract, without the need for further underwriting. All other options can be found in our Relevant Life Cover policy conditions.

Does Relevant Life Cover have a terminal illness benefit?

Yes, we’ll pay the full amount of cover if your client is diagnosed with a terminal illness and given less than 12 months to live. We won’t pay a claim for terminal illness if the policyholder is diagnosed with a terminal illness within 12 months of the end date of the policy.

Who deals with the claim if the policyholder dies?

All Relevant Life policies are written in trust and money paid to the trustees. Therefore, the trustees would need to contact us directly.

0800 032 3962

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Business Protection Specialist Team

Option 1 – New and current applications

Option 2 – Underwriting

Option 3 - New agency set up and login queries

Option 4 - Business Protection sales team and quotes

Options 1-3, 8.30am - 6.30pm Mon - Fri

Option 4, 9:00am - 5:00pm Mon - Fri

We may record and/or monitor calls for training and audit purposes.

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Business Protection options

Find out more about the type of businesses we cover and the policies available.

More about our Business Protection options

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Calculators and tools

See all our business protection calculators available to simplify your client conversations.

Our Business Protection calculators

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LV= Business Care

Our Business Protection includes valuable telephone support for your clients and their employees.

LV= Business Care

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Business Protection support team

Our team will make sure that all your Business Protection applications are dealt with quickly and efficiently.

More about our business support team

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FOR UK FINANCIAL ADVISERS ONLY
LV=, County Gates, Bournemouth, BH1 2NF, UK