Most business owners insure their premises, equipment, and stock without a second thought, yet far fewer protect against the loss of the people who keep the business running. Business protection is designed to fill that gap, whether it involves a key employee, a business partner, or a shareholder.
We work with business owners, partnerships, and limited companies to structure business protection cover correctly, taking into account the legal and tax considerations surrounding trusts and business ownership. This helps ensure any payout goes to the people or business where it’s needed most.
Legal & General’s research into UK small and medium-sized businesses found that 53% of SME owners believe their business would stop trading within 12 months of losing a key individual, yet more than half have no key person protection in place. The Hiscox Global Protection Gap Report 2025 also found that 74% of UK SMEs report some level of underinsurance, with 65% holding less than £1 million of public liability cover. It’s a gap that’s easy to overlook until it’s too late.
Covers the financial impact on a business if a key employee, whose knowledge, relationships, or specialist skills are critical to the company’s success, dies or becomes seriously ill. The payout can help cover recruitment costs, replace lost profits, or repay business debts that depended on that individual’s contribution.
Ensures that if a shareholder dies, the remaining shareholders have the funds to purchase their shares from the deceased’s estate. This helps keep ownership and control of the business with the remaining shareholders, rather than allowing the shares to pass to someone outside the company by default.
A Relevant Life Policy is a tax-efficient way for a limited company to provide individual life cover for an employee or director. It is often more cost-effective than a personal life insurance policy, as the premiums are usually treated as an allowable business expense rather than a benefit in kind.
Covers outstanding business debt if a key person linked to that borrowing dies or is diagnosed with a critical illness. This helps protect both the business and any personal guarantees associated with the loan. It is particularly important if you’ve taken out a business loan secured against the company or personally guaranteed by a director.
| Policy Type | Who It Protects | Typical Trigger |
|---|---|---|
| Key Person Insurance | The business itself | Death or critical illness of a named key employee |
| Shareholder Protection | Remaining shareholders | Death of a fellow shareholder |
| Relevant Life Plan | An individual employee or director’s family | Death of the covered employee during employment |
| Business Loan Protection | The business and any personal guarantors | Death or critical illness of the person tied to the borrowing |
Amir and Ben each owned 50% of a growing consultancy but hadn’t considered what would happen if one of them died until we raised shareholder protection during a discussion about business finance. We arranged cover that would allow the surviving director to buy the deceased shareholder’s shares from their estate, ensuring the business could continue with clear ownership and without the risk of a dispute.
A logistics firm relied heavily on an experienced account manager who managed most of its client relationships. The directors arranged key person insurance so that, if she were unexpectedly unable to work, the payout would help cover the cost of recruiting and training a replacement, as well as offset the likely loss of revenue while the new employee became established.
It depends on the type of policy and how it’s structured. Relevant Life Plans are often treated as an allowable business expense, while other business protection policies may have different tax treatment. We’ll help you understand how this applies to your specific circumstances, alongside guidance from your accountant.
Sole traders don’t have shareholders or business partners in the same way as limited companies, but personal protection such as income protection and life insurance is just as important. As the business often depends entirely on one person, having the right cover can help provide financial security if the unexpected happens.
Without shareholder protection, a deceased shareholder’s shares would usually pass to their estate. This could result in family members becoming part owners of the business, or leave the remaining shareholders struggling to raise the funds needed to buy the shares. The GOV.UK guidance on running a limited company also provides useful information about directors’ responsibilities alongside shareholder protection planning.
It’s usually based on the financial impact that person’s absence would have on the business, taking into account factors such as their contribution to profits, the cost of recruiting and training a replacement, and any revenue directly linked to their role. We’ll help you assess the appropriate level of cover rather than choosing an arbitrary figure.
