All About Business Protection: a Q&A with Esther Walker

If you’re a business owner, its really important that you are aware of the Business Protection options available to you. Protection is a vitally important component of your financial plan, but it can be hard to understand the difference between different types of protection. The two you are likely to encounteras a business ower are Relevant Life Protection (RLP) and Key Person Protection (KPP). These are also sometimes referred to as Relevant Life Insurance and Keyman or Key Person Insurance.We asked Esther Walker, Partner and Financial Planner here at Wealth Matters, to answer some questions about Business Protection for you. Here’s what she had to say...Hi Esther, thanks for talking to us about Business Protection. What are the main differencesbetween Relevant Life and Key Person Protection?Key Person Protection is designed for business continuity purposes. It helps the business deal withthe loss of a key person if they were to pass away – for example, a managing director or senior staffmember.Relevant Life Protection is designed for the insured person and their loved ones, which is paid bythe business and not the insured person. It pays out a tax-free cash lump sum to help the familyfinancially if the insured person passes away.So in summary, KPP is for the benefit of the business and RLP is for the benefit of the employee andtheir family.Why are these considered Business Protection and not Personal Protection?They are considered Business Protection because it pertains to the direct interest of a business,not purely personal affairs. The Premiums on KPP and RLP are typically a tax-deductible businessexpense eligible for corporation tax relief.So if my employer has supplied me with a RLP, should I still consider Personal Protection?This depends on the amount of cover that has been provided by your employer. If needed, youcould take out personal cover to top up your protection needs. You also need to be aware of theimplication of moving companies, as some RLP can be moved to your new company but it dependson the Provider and if the new company agrees to take it on. As always, this depends on yourpersonal circumstances – always seek bespoke advice before acting.Who should consider RLP and why?This type of protection is best for employers who want to provide death-in-service benefitsfor a few employees and for directors wishing to provide their own death-in-service benefits.It means they can select certain employees instead of taking out a death-in-servicescheme on all employees.Who should consider KPP and why should they?A company wanting to insure a key person who is crucial to the success of a company.Unlike RLP which is paid to the employee’s family, Key Life is paid to the business as alump sum to help cover loss of sales, or hiring someone new (and other relevant reasons) inthe event of their Key Person passing away.If you have any further questions about the different types of Business Protection, please do nothesitate to get in touch with us. We will be happy to talk you through it.