You do it to yourself you do – relevant life insurance

How you can have share protection as a one person limited company.

If you ARE your business. A consultancy based business model or simply that you find the work and do the work. The big challenge is if you die, your business dies. Or another fine phrase that I collected was “if you are unfortunate enough to pre-decease your business” have a look at the two minute video on the landing page of Business Protect’s website to see a simple example of share protection.

What it really means is that essentially you have no business value to pass on. Potentially nothing to sell. Possibly a family or loved ones facing financial difficulty as you were the breadwinner.

This is where relevant life insurance is such a fantastic innovative product. It can work as one person share protection. Allowing you to pass on the monetary value of the business you’ve worked so hard to build on to your family or loved ones and ensuring they avoid financial hardship should you indeed be unfortunate enough to pre-decease your business.

It’s all about legal entities, if you have a limited company you have two legal statuses. One as the limited company and one as an individual, an employee of that limited company. So this is how it works…

The limited company takes out a relevant life insurance policy (one person death in service) on the employee (you). It’s based on a multiple of income. This can include salary, dividends, P11D benefits in kind and for some providers, income from other sources.

The multiple is usually between 15-20 times income, dependent on provider and age.

So think about this, at a 15 times income multiple, if you have an income of £33,333 you can have a relevant life insurance policy for £500,000. Paid for by the company, full corporation tax relief on the premiums. It doesn’t count as a P11D, the proceeds go to your beneficiaries tax free by way of a flexible business trust! Tell me that is not a no-brainer!

Ok Martin, that’s all great but where’s the witty rock and roll analogy! Ok, it’s all about arse covering. I stopped being in a band when my wife became pregnant with our first born, Felix. I was happy suffering for my art but I wasn’t prepared to let my unborn child suffer for my dreams. Hence the logical move into financial services. It’s the same in business, there is risk. A relevant life insurance policy can mitigate that risk and if the worst happens, and you pre-decease your business, your loved ones won’t be left suffering for your dream.

Rock on.