What is the difference between Shareholder Protection and Partnership Protection?
If you run a company, you may have heard of shareholder or partnership protection. They are, in fact, the same thing – an invaluable kind of business life insurance that offers your business protection in times of uncertainty. The main difference being that one is for a partnership and the other for a company with multiple shareholders.
What is Shareholder Protection?
Shareholder Protection allows you to keep control of your company in the event of the severe illness or death of a shareholder. Shareholder insurance pays out a lump sum to your business if a business owner or shareholder dies or suffers a severe illness. This money can be used to purchase the ill or deceased person’s shares, ensuring you retain control of the business.
What are the benefits of Shareholder Protection?
Usually, share ownership passes to the personal beneficiaries of the shareholder in the event of their death. This may mean the beneficiaries find themselves owning unwanted shares in a business that provides little interest for them.
With shareholder insurance, the company can buy up those shares, relieving the beneficiaries by ensuring they have a willing buyer who can pay a good price for them.
For the business owners, shareholder insurance avoids the situation where a share of the company is owned by someone with no interest in it, or even a situation where a rival company may be able to issue a takeover bid.
Shareholder Protection provides substantial financial cover to ensure there will always be capital available to buy up shares at the time when it is needed most.
This is especially valuable during times of uncertainty, such as following the death of a key person in the company, when banks and other lenders are more reluctant to lend money or extend loans than usual.
It is also possible to add critical illness cover to a shareholder protection policy, which allows a shareholder to sell their share of a business should they be diagnosed with one of the covered illnesses.
Shareholder protection is tax efficient!
With this kind of business life insurance, you get peace of mind, and you can even save on tax.
The insurance policy is considered a commercial agreement, so there is usually no inheritance tax to pay on the premiums, providing all owners participate, or if there is (such as the 10 year periodic charge), the amount is negligible. Capital Gains Tax doesn’t apply on the transfer of shares either, except in the rare case of a big increase in share value between the death of the owner and sale of the shares. Other taxes that may be applied, such as Pre Owned Assets Tax, are also negligible, making this a great policy to help you save on tax.
Get Covered – Get a Quote
With so many insurance providers on the market, finding the right cover for your company can be daunting. At Business Cover Expert, we make it our job to help you find the best policy for your needs.
Get in touch today to receive your simple and free business life insurance quotes and find the right policy to keep you and your business protected.