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Key Person Insurance


This product is designed to protect a company's key personnel such as business owners, directors, sales personel, production managers, research and development staff or any other people with specialist skills or knowledge.
The cover will provide a lump sum benefit against
• Loss of profits.
• The need to recruit or train a replacement.
• Loss of important personal or business contacts.
• Difficulties in meeting existing loan repayments.
• Loss of confidence from suppliers and customers.
• Difficulties in raising new finance for new developments.
• Loss of detailed knowledge of the businesses processes and systems.
• Having to repay a loan the key person has made to the business.
• Loss of goodwill

 

Business ownership protection
This product provides benefits for the loss of a partner or shareholding that can have a major impact on the future success of a business in terms of insuring control of the remaining owners by providing a lump sum.

 

Relevant life cover

There are various advantages to this. For a start, it offers high-earning employees who have substantial pension funds a number of tax advantages. That's because the lump sum benefits do not form part of the employee's annual or lifetime pension allowance and although the company pays the premiums, they are not normally taxed as a benefit in kind - which can offer huge savings, especially for a higher rate taxpayer.

 

So while it's mainly aimed at high earners, a relevant life policy can be suitable for any employee. What's more, the payments may also be treated as an allowable expense for the employer in calculating their tax liability, which means it's also particularly suitable for small businesses that don't have enough eligible employees to warrant a group life scheme.

 

Here we give you an example to show the effects of taxation on the true cost of providing the same net payment for an ordinary life policy taken out and paid for by the employee, compared to a relevant life policy taken out by their employer.

 

How a relevant life plan can cut tax on company costs:

 

  Ordinary life plan Relevant life plan
Payment in premium £1,000 £1,000
     

Company gross cost Employee’s National Insurance

   
contribution at 2% £34 -
Income tax at 40%

£690

-

Employer’s National Insurance

   
contribution at 13.8% £238 -
Total gross cost £1,962 £1,000
Company net cost Corporation tax relief at 20%                 £392 £200*
Net cost £1,570 £800*
     
Saving      £770

                                                                                                                              

*Assumes that corporation tax relief at 20% has been granted under the ‘wholly and exclusively’ rules.


In both cases we have assumed a payment of £1,000 each year for the life cover on an employee who is paying income tax at 40% and employee’s National Insurance at 2% on the top end of income. We have also assumed that the employer is paying corporation tax at the small profits rate of 20% and will pay employer’s National Insurance at the contracted in rate of 13.8%.

 

Contact us today or call 01189 291313 for more details.

Contact IQ Financial Solutions

Our other services include: Will Writing , Estate Planning , Trusts , Life Assurance, Critical Illness , Permanent Health Insurance , Family Income Protection , Unemployment Cover , Accident and Sickness Cover , Home Insurance, Private Medical Insurance .

IQ Financial Solutions Limited is an appointed representative of H L Partnership Limited which is authorised and regulated

by The Financial Conduct Authority (FCA) – registration number FRN 590517.

IQ Financial Solutions Limited Registered in England and Wales, Registration No. 8248919.

The advice and/or guidance contained within this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK.
Our Address: Abbey House,1650 Arlington Business Park, IQ Financial Solutions, Theale, Reading, RG7 4SA - Telephone Number 01189 291313.