Business Loan
Protection Insurance
If one of your company’s main employees were to leave, Business Loan Protection might be able to save it financially.
Protection for business loans against the impact of death or critical and terminal illness of key members of staff who have a direct impact on the business’s profits, such as a business owner, director or employee with specialist skills.
Business Loan Protection
Many businesses borrow money to fund expansion projects or cover regular expenses, but could yours continue to operate if one of your main employees were to sadly pass away or be given a serious or terminal illness?
If one of your company’s main employees were to leave, Business Loan Protection might be able to save it financially.
Every employee who directly affects the company’s profits is considered a key employee. They could be a company director, owner, or any employee with specialised knowledge.
What is Business Loan Protection
Business Loan Protection with Life Expert can help your business pay an outstanding overdraft, loan or commercial mortgage, should a key employee die or be diagnosed with a terminal illness (with a life expectancy of less than 12 months) during the length of the policy. It could also pay out if they’re diagnosed with a specified critical illness (if Critical Illness Cover is chosen at outset for an extra cost) during the length of the policy.
When you take out Business Loan Protection, your cover should reflect the amount your business owes in borrowed money. This can ensure that if you claim for a pay-out, you have sufficient cover in place to repay your business loans.
There can be serious implications for businesses that are unable to pay back loans, so Business Loan Protection can help to give your staff and stakeholders some peace of mind.
How Does Business Loan Protection Work
You can purchase Business Loan Protection on a “level” or “decreasing” cover basis. If a legitimate claim is filed, the money can be used to pay off the company’s unpaid obligation.
What Documents Are Required To Set up a Business Loan Protection
Your business’s legal configuration will affect the paperwork you need to provide when applying for Business Loan Protection. If your business is organised as a limited company, limited liability partnership (LLP), or Scottish partnership, you must fill out the “ownership of benefits” section of the Business Protection application form.
The same applies if you run your business as a sole trader, but you’ll also need to submit a Discretionary Trust deed.
You must submit both a Partnership Protection Trust deed and the Business Protection application form if you are filing as a partnership.
Why Consider Business Loan Protection
For a firm, being unable to pay back loans after the passing of a key employee can be a major issue.
Business Loan Protection could give your company more assurance while preparing for the future of its finances.
How Does Business Loan Protection Work with Tax & Trusts
Business Loan Protection & Tax
The worth of the company may rise as a result of a cash infusion from policy proceeds. The value of the crucial person’s estate would rise if they had also been a shareholder. Any Inheritance Tax liability might go up if the shares were going to someone other than the spouse or civil partner and business relief wasn’t fully available.
Because the money borrowed will be repaid rather than money the business has made, life insurance policies used to safeguard business loans are typically not considered business income. Because the insurance was purchased to safeguard the company’s capital, the premiums would not be eligible for tax reduction.
Business Loan Protection & Capital Gains Tax
If a person sells their ownership stake in the company as a result of a terminal or serious illness, they may be liable for capital gains tax.
Depending on your specific situation, there can be further tax ramifications. Hence, before proceeding, we urge that you speak with your own tax or legal counsel.
Business Loan Protection & Trusts
A traditional partnership business in England and Wales can set up their Business Loan Protection in trust.