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Work out how to the spread cost easily between shareholders or partners

Customer friendly video explaining why Share & Partnership Protection is important

Share Protection and Partnership Protection

How much cover?

Valuing a company can be difficult and surviving shareholders will need enough money to purchase the lost business owner’s shares. In the absence of an accountant’s valuation, as a guide, you should consider looking at the following when setting the cover.

  • Net profit from the last 3 years
  • Assets (such as property, vehicles, specialist equipment)
  • Liabilities
  • And price earnings ratio (assuming future performance)

In general, the amount of cover you recommend should equal the market value of each owner’s share of the business.

Premium equalisation

If a business had four partners each with an equal share, you might expect the owners to each pay 25% of the total premiums. However, if one partner is older, or has pre-existing conditions, the premiums will increase (just like personal protection). Premium equalisation makes sure business owners who take out Share or Partnership Protection only pay an amount that is commercially relative to the benefits they stand to gain.

It’s important to equalise premiums; missing out this essential step means any money paid under a claim could be liable to income inheritance tax (HMRC consider premium equalisation essential for commercial arrangements).

Our easy-to-use LV= Premium Equalisation Calculator helps you split the overall premium costs between the business owners, according to their individual share and protection risk. If using the calculator, print off two copies of the report, one for your client’s accountant and one for your own file.

Helping you calculate the right amount of cover

We’ve developed a number of calculators to help you successfully position and recommend Business Protection.

  1. Our Business Valuation calculator has been designed to help you and your client value the business accurately. This calculator calculates the potential value of the business by using the average net profits, net assets and a profit multiplier.
  2. The Premium Equalisation calculator will show you how to split the premium costs fairly between the shareholders or partners, taking into account their shareholding, age and health. The principle behind equalisation is that each individual should pay a commercial amount relative to the benefit they or their family is likely to receive.
  3. Our Business Risk calculator will help you demonstrate the likelihood of health issues affecting key people, as well as the financial impact this would have on the business.

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