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Life insurance for small businesses

How a small business can benefit from life insurance

Taking on a new business can be tough work, but through hard work and determination, the successes of a business can feel a lot greater. There are plenty of financial concerns a small business can have, as well as meeting the needs of employees and securing the longevity of your business. Life insurance for small businesses can help to safeguard against uncertainty.

Small businesses can benefit from life insurance in a number of ways. Predominantly, life insurance can help provide protection for the business and the employees within it, including the business owner. It can provide peace of mind for the business and help to keep the company running should the unexpected happen.

Planning for the future

Life insurance for small businesses can be the foundation of a business succession plan. If something were to happen to a business owner, it can cause a big impact on the business financially. Loans may be recalled, profits may be lost and the uncertainty of the future of the business can cause concern amongst customers, suppliers and employees. Life insurance for small businesses can ensure that you are well prepared for any circumstance.

With the money available to buy back the share, the remaining shareholders are able to keep control of the business and the family can receive the value of the share. This can not only help reduce conflict but ensure your family are looked after.

Protect your best assets

Too often, businesses will insure their equipment and the business itself but forget about the most important assets, the people. The skills, knowledge and experience of your employees are what keeps the business profitable. Key man insurance or key employee insurance is a life insurance policy taken out on those hard-to-replace members of staff. This could be a manager, top salesman or a software developer.

Key man insurance is paid for by the business and, therefore, the business receives the payout in the event of a death of a key employee. This money can then be used for training and recruitment, as well as covering any loss of profits. The company may experience loss of customers, suppliers, or specialist knowledge within the business. The money can be used to counteract the effect until a replacement situation is sorted.

Employee retention and selection

Offering employees, a competitive benefits package including a life insurance policy can help to retain staff. Not only that, but it can help to attract high-calibre employees to the business.

Life insurance is one of the most highly valued benefits after health insurance, which means employees are more likely to stick around in their jobs to avoid losing it. Currently, 43% of SME employers don’t provide additional benefits other than the legally required workplace pension. Therefore, providing benefits can really help your business to stand out to quality employees and strengthen your team.

Save on tax

Both key man insurance and relevant life policies for employees are tax-efficient life insurance policies. You can run the policy through as a business expense to save on corporation tax. Relevant life policies also come with a tax-free payout so that the family receive more of the money.

If your policy is written in a trust, you can offset this against any inheritance tax paid on the estate too. Therefore, your loved ones can receive more of the wealth you intended to leave for them.

Pension maximisation

If you place your life insurance policy into a trust, then it doesn’t count towards your annual pension allowance. Therefore, people with substantial pension pots can avoid paying a high tax rate on it when they retire. Small business owners or directors may benefit from this the most. Placing the policy in the trust also means the payout itself is tax-free too.

Life insurance for small businesses is actually relatively affordable and can help companies protect themselves against the unexpected. The different types of business life insurance policies ensure that you can protect what’s most important to you.

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