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Life insurance and other insurance solutions for Company Directors and Key Personnel
Directors and key personnel are the backbone of a company's success, bearing substantial responsibilities and risks. Securing comprehensive insurance coverage is vital to ensure their families and the business remain safeguarded. Discover how our tailored solutions can provide peace of mind while you fulfil your crucial duties.
At WeCovr, we specialise in offering insurance solutions tailored to high-responsibility roles like company directors and key personnel. We understand the importance of being a responsible leader, both at work and for your family's well-being. Our aim is to provide the necessary insurance coverage to support you in these roles.
Securing appropriate insurance shouldn’t be a source of stress or financial burden. We firmly believe that everyone in key positions within a company should have access to reliable and affordable insurance. It's about ensuring financial stability for your loved ones should the unexpected occur.
Our experience in assisting families with insurance matters spans several years. We recognise the significance of ensuring that your beneficiaries are adequately protected in the event of unforeseen circumstances, including injury, illness, or unfortunate outcomes.
Key Person or Relevant Life Insurance?
Key Person Insurance and Relevant Life Cover both fall under the umbrella of Life Insurance, yet what distinguishes the two? Despite initial similarities, they serve distinct purposes.
Both insurances are borne and funded by a business. However, while Key Person Insurance safeguards the business, Relevant Life Cover is designed for the benefit of the employee and their family. It's crucial not to conflate these coverages.
Why opt for Key Person Insurance? Every business has pivotal individuals whose illness or demise could significantly affect the company's continuity. This insurance is sought to ensure financial support for business continuity in dire circumstances involving key personnel.
Businesses might not solely acquire Key Person Insurance by choice; lenders or investors might stipulate its purchase to safeguard their interests in the company. Since it caters to the business's needs, payouts from this policy directly benefit the business. It doesn't substitute the earnings of the absent individual but aids in covering costs until their return to work. It could also assist in training or covering the replacement's salary for a period.
When Key Person Insurance is for business continuity, the premiums are usually tax-deductible as a business expense, provided they're on a non-shareholding employee's life, solely for the business's benefit. However, any payouts upon a claim will be subject to tax.
If the policy is bought to safeguard a loan, the premiums may not tax-deductible since they serve the lender's direct benefit. Nevertheless, the benefit is typically received tax-free. Consulting an accountant about the tax implications is advised, as they depend on the policy's purpose and setup.
How does Relevant Life Cover differ?
While Key Person Insurance mitigates business losses, Relevant Life Cover offers tax-free financial support to an employee's family upon their death.
Usually, directors purchase Relevant Life Cover to safeguard their families, but it's the business that bears the cost. Smaller companies might consider it if they lack the workforce for a Death In Service scheme but wish to provide some personal Life Insurance to their employees.
Obtaining Relevant Life Insurance through a business ensures high tax efficiency. Establishing a Relevant Life Trust often leads to tax-free benefits for beneficiaries. Additionally, corporation tax relief, income tax relief, and National Insurance relief can be availed by choosing Relevant Life Cover over personal Life Insurance.
The coverage levels between Key Person Insurance and Relevant Life Cover also differ. Key Person Insurance coverage depends on business metrics and an individual's significance to the business. Relevant Life Cover, however, is typically represented as multiples of salary and dividends.
Save up to 49% with a Relevant Life Cover compared to Private Coverage
Protect your loved ones and beneficiaries with a tax-free lump sum through a Relevant Life Policy. This policy, paid for by your business, ensures no benefit in kind tax and offers coverage up to 30 times your gross annual earnings.
A Relevant Life plan provides an affordable and efficient way for employers to secure life cover for employees or directors, benefiting the employee's family or financial dependents.
A Relevant Life Policy covers the benefit payable on death or upon diagnosis of a Terminal Illness (12 months or less to live). Additionally, there's an option to include coverage for serious illnesses like cancer, heart attacks, or strokes.
Tax Benefits of Relevant Life Policies
Under a Relevant Life Policy, there's no benefit-in-kind tax for the employee. Premiums are non-taxable, making it a valuable option for retirement and death benefits.
Eligibility and Usage of Relevant Life Policies
Any employee or director within a limited company, partnership, charity, or sole trader's employment is eligible. However, sole traders or equity partners themselves are not eligible for a Relevant Life policy because Relevant life insurance plans are not available where there is no employer/employee relationship. This policy cannot be utilised for business loan cover, business continuity, or succession planning.
A relevant life insurance policy covers the following types of individual:
- Employers seeking death-in-service benefits for a limited number of employees, insufficient for a group scheme setup.- Directors aiming to secure individual death-in-service benefits without taking out a scheme covering all employees.
- High-earning individuals, including directors, for whom death-in-service benefits do not contribute towards their 'lifetime allowance' (£1.073 million 2023/24).
Trustees, Beneficiaries, and Coverage Limitations
The policy will be held in a Discretionary Trust, ensuring no inheritance tax (IHT) for the estate upon death. Trustees can include other shareholders/directors or friends/family members, while beneficiaries usually encompass dependents like spouses and children.
The maximum cover varies based on age and income and insurance providers. For example, you may be looking at the following ratios:
- Up to age 35: 30 times salary
- Ages 36-50: 25 times salary
- Ages 51-60: 20 times salary
- Ages 61+: 15 times salary
Age and Coverage Limitations: Some insurers offer cover up to age 75, ensuring prolonged protection for you and your loved ones.
Secure Tailored Insurance for Company Directors and Key Personnel Today
Secure comprehensive and tailored insurance coverage suited to the unique demands of directorial or key personnel roles. Request a free, no-obligation quote today from WeCovr and ensure holistic protection for yourself and your loved ones in high-responsibility positions!
Directors and key personnel hold pivotal positions across various industries, including:
- Technology and innovation
- Corporate management
- Financial sectors
- Manufacturing
- Healthcare
- Startups, scaleups and mature businesses in various sectors
At WeCovr, we leverage our wide network of underwriters specialising in insurance for directors and key personnel, tailoring coverage to suit individual needs.
Unlike many other professions, directorial positions encompass significant responsibilities and exposures that traditional insurance models may not cover comprehensively. The risks associated with such roles include:
- Decision-making liabilities
- Financial accountability
- Business strategy risks
- Legal and regulatory compliance responsibilities
These factors contribute to insurance providers assessing directorial roles as extra important, necessitating specialised coverage distinct from standard individual insurance policies.
Key Considerations for Insurance Coverage for Company Directors and Other Key Personnel
When seeking insurance coverage for directors and key personnel, there are crucial details that insurers may inquire about, including:
- Duration and nature of directorial duties
- Industry sector and associated risks
- Employee’s age and overall remuneration, including salary, bonuses, benefits in kind and regular dividends from the shares in the employers company or a company within the employers group of companies.
Get a free, no-obligation quote today - our advisers at WeCovr are equipped to guide and assist company directors and key personnel in obtaining the most suitable insurance coverage.
Benefits offered by income protection, life and critical illness insurance
Life insurance, income protection and critical illness insurance are indispensable for every family because a child loses a parent every 22 minutes in the UK, while every single day tragically 60 people suffer major injuries on the UK roads. Some people become unable to work because of sickness or disability.Life insurance cover pays out a lump sum to your family, loved ones or whomever you choose to get the money. This can be used to secure the financial future of your loved ones meaning they would not have to struggle financially in the event of your death.
If it's a critical illness cover, the payout happens sooner - upon diagnosis of a serious illness, disability or medical condition, easing the financial hardship such an event inevitably brings.
Income protection insurance can be very important for anyone who relies on a pay check to cover their living costs, but it's especially important if you’re self-employed or own a small business, where your employment and income is a bit less stable. It pays a regular income if you can't work because of sickness or disability and continues until you return to paid work or you retire.
In a world where 1 in 4 of us would struggle financially after just four weeks without work, the stark reality hits hard – a mere 7% of UK adults possess the vital shield of income protection. The urgency of safeguarding our financial well-being has never been more palpable.
Let's face it – relying on savings isn't a solution for everyone. Almost 25% of people have no savings at all, and a whopping 50% have £1,000 or less tucked away. Even more concerning, 51% of Brits – that's a huge 27 million people – wouldn't last more than one month living off their savings. That's a 10% increase from 2022.
And don't even think about state benefits being a safety net. The maximum you can expect from statutory sick pay is a mere £109.40 per week for up to 28 weeks. Not exactly a financial lifeline, right?
Now, let's tackle a common objection: "But I have critical illness insurance. I don't need income protection too." Here's the deal – the two policies apply to very different situations. In a nutshell:
- Critical illness insurance pays a single lump sum if you're diagnosed with or undergo surgery for a specified potentially life-threatening illness. It's great for handling big one-off expenses or debts.
- Income protection, on the other hand, pays a percentage of your salary as a regular payment if you can't work due to illness or injury. It's the superhero that tackles those relentless monthly bills.
Types of life insurance policies
Common reasons for getting a life insurance policy are to:✅ Leave behind an amount of money to keep your family comfortable
✅ Protect the family home and pay off the mortgage in full or in part
✅ Pay for funeral costs
Starting from as little as a couple of pounds per week, you can do all that with a Life Policy.
Level Term Life Insurance
One of the simplest forms of life insurance, level term life insurance works by selecting a length of time for which you would want to be covered and then deciding how much you would like your loved ones to receive should the worst happen. Should your life insurance policy pay out to your family, it would be in a lump sum amount that can be used in whatever way the beneficiary may wish.
Decreasing Term Life Insurance
Decreasing term life insurance works in the same way as level term, except the lump sum payment amount upon death decreases with time. The common use for decreasing term life cover is to protect against mortgage repayment as the lump sum decreases along with the principal of the mortgage itself.
Increasing Term Life Insurance
Increasing term life insurance aims to pay out a cash sum growing each year if the worst happens while covered by the policy. With increasing term life cover amount insured increases annually by a fixed amount for the length of the policy. This can protect your policy's value against inflation, which could be advantageous if you’re looking to maintain your loved ones’ living standards, continue paying off your mortgage in line with its repayment schedule and cover your children’s education fees.
Whole of Life Insurance
Whereas term life insurance policies only pay out if you pass away during their term, whole of life insurance pays out to your beneficiaries whenever this should happen. The most common uses for whole life insurance are to cover the costs of a funeral or as a vehicle for your family's inheritance tax planning.
Family Income Benefit
Family income benefit is a somewhat lesser-known product in the family of life insurance products. Paying out a set amount every month of year to your beneficiaries, it is the most cost-effective way of maintaining your family's living standards to an age where you'd expect them to be able to support themselves financially. The most common use would be for a family with children who are not working yet so are unable to take care of themselves financially.
Relevant Life Insurance
Relevant Life Insurance is a tax-efficient policy for a director or single employee. A simple level term life insurance product, it is placed in a specific trust to ensure its tax efficiency. The premiums are tax deductible and any benefit payable should a claim arise is also paid out tax free, which makes it an attractive product for entrepreneurs and their businesses.
Important tips you MUST know before you buy Life Insurance to avoid a terrible mistake
1. Picking the type of cover and the term you need can save you many thousands over 20 years
Though an agent or adviser can help, this question is completely down to you. The main thing to consider is what is the reason for getting life insurance and what will the payout be used for. If it is for funeral expenses you probably want to insist on a whole of life insurance policy - these typically pay less commission to the agent than term policies so you might need to ask specifically for a whole of life quote.Whole of life insurance means you are covered until you die, regardless of how long you live for. As you are looking for your funeral to be covered and no-one knows when they are going to die, whole of life is the only way to guarantee a pay-out.
If, on the other hand, you have young children and you want to make sure that should the worst happen your kids don't suffer financial hardship, then you probably need a term life insurance policy. This is much, much cheaper then whole of life insurance. For example, let's say you are a 40 year old and you have two kids aged 5 and 7. You need life insurance as you know if anything happens to you there will be a huge reduction in the household income and possibly an increase in childcare costs. You still need the roof over their heads, food on the table and clothes on their backs, so they will need financial help to avoid being forced to move house and rely on state help.
So let's say you think £250,000 will get the mortgage paid off and leave some money behind to ensure they don't suffer financially. On a whole of life basis this will cost you at least £165 every single month. Or, you can get a lower cost term policy to age 90 for a much more reasonable £39 per month. But, wait a second, the reason for the cover was for your young kids aged 5 and 7 to make sure they don't suffer financially, right? So when your 90 years old, your kids will be in their 50's.....older than you are right now! The mortgage will be paid off and the kids will (hopefully) be earning their own money by then and buying their own food and clothes.
So let's look at matching the term to the reason you need the cover in the first place......think roughly what age will your kids no longer be financially dependent upon you. Even play it safe a little, say when they are 25 and 27. Okay so we can look at a 20 year term, meaning if anything happens to you while the kids are financially dependent on you, there is £250,000 to help them out. This brings the cost down for the same level of cover to only £15 per month.
Total cost over 20 years for the £250,000 of cover:
Whole of Life = £39,770
Term to 90 = £23,400
20-year term family protection = £3,600 (£36,170 saving on Whole of Life and £19,800 saving against term to 90)
These are pretty big savings and money that can be spent on enjoying life!
2. Non-disclosure could see your claim declined or cut in half
The answers you give on the medical application are YOUR responsibility. You will be warned to answer all questions truthfully and accurately otherwise a policy may not pay out in the event of a claim. But what if you miss a question or the agent you speak to doesn't put it in the application?Well these mistakes could cost your family tens of thousands of pounds. Let's take the smoking question as an example, typically they will ask if you have smoked or used tobacco products in the last 12 months. Let's say you say to the agent that you used to smoke, but haven't for about a year. If the agent just puts in "no" and it turns out that your doctor records show you still smoked 8 months ago, the provider could decrease the payout by around half.
So you might have insured yourself for £100,000 to cover your mortgage and leave money for the kids, but the policy pays out £50,000 which might not even cover the mortgage.
Worse still if a serious medical condition is not disclosed that would have resulted in the provider not offering terms, the claim will be declined and all your family will get is their premiums returned.
3. Don't fund the taxman
Ask about trust. Putting your policy into trust can save thousands in inheritance tax and probate costs. Inheritance tax could swipe up to 40% of the value of the policy out your families hands into the tax mans pocket. You can use our inheritance tax calculator to estimate your potential inheritance tax liability and savings or you can ask your agent or provider for a trust form and ask them to help you fill it out. This is free, but the savings can be tens of thousands of pounds for your family when they need it most."I was shocked when I found out 40% of my sum assured could end up going on tax. The consultant was able to put it in trust online for me in 5 minutes, potentially saving my children £120,000"
4. Watch out for loaded premiums from banks and mortgage advisers!
This is a tactic used by many banks and some mortgage and financial advisers. Basically they take the standard premium then hike on an extra amount to get more commission.Easy way to check though, go to a site like WeCovr where you can get an expert to provide you a range of quotes. If your bank or adviser loads their premiums, the policy you are getting is identical but can cost you 20% more....which over the term could cost you thousands.
As an example we looked at Santander who offer life insurance from Aviva. The results were shocking! Everything is the same - same date of birth, same smoking status, same policy term, same amount of life insurance and crucially, the same provider. So why is the "discounted" Santander policy nearly £5 more expensive every month? Well we don't know the exact details of the commercial arrangement, but you have to assume the extra is going into the bank's back pockets.
So watch out for big banks and their discounts and loyalty bonuses, really they are just discounting an already massively inflated price.
5. It's not cheaper going direct, in fact it can be more expensive
An extremely common myth is going direct to the insurer will save you money because they don't need to pay commission to the broker. This is true, but they do need to pay for their advertising, their staff and overheads. With a broker they only pay if you buy, so often brokers can get lower prices than going direct to the provider.If you want the best price, you're almost always going to get the best deal from a broker.
Why is it important to get life insurance early?
👉 Many people are very thankful that they had their life, income protection, and critical illness insurance cover in place before running into some serious issues. Critical illness and income protection insurance is as important as life insurance for protecting your family's finances.👉 We insure our cars, houses, bicycles and even bags! Yet our life and health are the most precious things we have.
Easily one of the most important insurance purchases an individual or family can make in their lifetime, the decision to buy life, income protection, critical illness and private medical health insurance can be made much simpler with the help of FCA-authorised advisers. They are the specialists who do the searching and analysis helping people choose between various types of life insurance policies available in the market, including income protection, critical illness and other types of policies most suitable to the client's individual circumstances.
It certainly won't do any harm if you speak with one of our experienced FCA-authorised insurance partner experts who are passionate about advising people on financial matters related to life insurance and are keen to provide you with a free consultation.
You can discuss with them in detail what affordable life, income protection, critical illness or private medical health insurance plan for the necessary peace of mind they would recommend! WeCovr works with some of the best advisers in the market.
By tapping the button below, you can book a free call with them in less than 30 seconds right now:
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Who Are WeCovr?
WeCovr is an insurance specialist for people valuing their peace of mind and a great service.👍 WeCovr will help you get your life insurance, critical illness insurance, private medical health insurance, over-50s funeral insurance and senior life insurance quote in no time thanks to our wonderful super-friendly expert partners ready to assist you every step of the way.
Just a quick and simple form and an easy conversation with our FCA-authorised life insurance, critical illness insurance and private medical insurance partner experts and your valuable insurance policy is in place for that needed peace of mind!