Frequently Asked Questions

What is Business Protection cover?
Who is covered by Business Protection?
Why are there no comparable covers available through commercial insurance brokers?
Where does the description Business Protection come from?
What factors need to be taken into account when considering Business Protection?
What are the main exclusions to Business Protection cover?
What is the maximum indemnity limit that could apply?
Can the cover apply to accident only (excluding sickness)?
Can the cover apply to protecting the value of the shares within the business?
Can the Cover apply to Sole traders?
How long can benefits be paid?
Who handles the administration of a claim?
What are the benefits under the policy?
How does the cover operate?
What are the benefits to the insured company?

What is Business Protection cover? ^top
Business Protection is a unique combination of covers, focused on business survival in the absence of one of its key persons. It reflects areas of cover which have previously been the sole domain of the life industry. The cover is a form of personal accident, disability, sickness or critical illness, income protection and Keyman rolled into one.

Benefits are payable to the business for various expenses and costs should a Director/Partner/Shareholder or Sole trader suffer an illness or accidental injury resulting in their inability to perform their usual occupation.


Who is covered by Business Protection? ^top
The cover is designed to protect the business entity. The policy cover is triggered by an insured person (a Director/Partner or Shareholder of the business) suffering an accidental injury or sickness. Sole traders are also offered cover. The beneficiary is the business or in the case of sole traders the individual (where the individual trades as himself).


Why are there no comparable covers available through commercial insurance brokers? ^top
Following the consolidation within commercial insurers over the past 18 years, very few insurers outside London market or Lloyds have the experience or innovation to focus on this particular sector plus Keyman policies have become the domain of the life industry and often suffer from the same complex and time consuming application procedures as many life products.

There is a realisation amongst commercial brokers that entering into discussion with their clients on one of their key assets, their people, is opening a discussion where few solutions actually exist or are accessible to the commercial broker. Until now.


Where does the description Business Protection come from? ^top
Business Protection has evolved throughout the life industry where it is becoming more and more prevalent. There is a concerted effort by the life industry to focus on exploiting this particular form of cover.

Swiss Re, The Insurance Report 2005, highlighted the potential for this sector; only 5-10% of businesses have any business protection, should a key person suffer long term absenteeism. This equates to approximately 2 million businesses without cover or protection.


What factors need to be taken into account when considering Business Protection? ^top
The business:

  • Identifies potential financial commitments of the business eg. overdraft facilities, loans,mortgage or lease payments;
  • Considers any Shareholder commitments to the business or whether the value of each individual’s shareholding needs to be protected, providing the business with the funds to buy back any shares held by the disabled individual;
  • Selects an indemnity limit against those Directors/Partners or Shareholders, who are named in the policy schedule;
  • Needs to assess if the business would suffer a drop in income or profits should a key person be unable to work for a considerable amount of time.


What are the main exclusions to Business Protection cover? ^top

  • Pre-existing medical conditions within 36 months prior to the effective date of the cover
  • Acts of war or terrorism
  • Radioactivity
  • Pregnancy or childbirth
  • Military Service
  • Professional sporting activities
  • Imprisonment
  • The consequences of alcohol or non prescribed drugs
  • Participating in a riot
  • Tropical diseases unless properly inoculated or medicated
  • Insured persons aged 65 or over
  • Self inflicted injury or attempted suicide
  • Flying, other than as a fare paying passenger.


What is the maximum indemnity limit that could apply? ^top
Quotations can be provided up to £200,000 per person without reference to the underwriter. Sums insured up to £800,000 per capita can be arranged with accumulation of a number of insured persons up to £2,500,000.


Can the cover apply to accident only (excluding sickness)? ^top
The ability to offer cover for accident only, excluding sickness cover can be provided through the quotation process. This would apply to Directors/Partners or a Sole trader.


Can the cover apply to protecting the value of the shares within the business? ^top
Cover in respect of shareholder protection, providing protection for all major Shareholders within the business, can be provided following an accident or sickness to an insured person or accidental death which results in permanent disability. Death by natural causes is not covered.

Should a company require appropriate funds to buy out one of its Shareholders following a permanent disability, shareholder protection can offer this solution. Sums insured per capita can be underwritten up to £800,000.

The indemnity limit chosen per insured person should reflect the value of the shares held within the company. Advice on how such a value can be arrived at should be referred to the company’s accountant or solicitor.


Can the Cover apply to Sole traders? ^top
Cover is available to Sole traders whether providing a lump sum payment to the individual or monthly benefits should the Sole trader become temporarily disabled.

The Indemnity limit selected should not be higher than 10 times annual salary.


How long can benefits be paid? ^top
Benefits will be paid after the selected excess period has expired in respect of temporary disablement; this could be 30, 60 or 90 days. Payment of benefits will cease upon expiry of the indemnity period of 12 months, or the policy limit as selected is exhausted.

Rehabilitation costs can be recovered as soon as an injury or sickness has been identified.

The indemnity limit against the insured person is the total amount the insurer will pay to the business in the event of a claim.

If the insured person is permanently disabled at the end of the cover period, a lump sum payment will be paid to the business.


Who handles the administration of a claim? ^top
All claims or potential claims must be notified to the insurer who has experience in handling similar claims. If necessary, the insurer will appoint a loss adjuster to provide additional advice and guidance.


What are the benefits under the policy? ^top
There are eleven sections under the policy:

  1. Director/Shareholder Protection
    The cover will pay the business a lump sum
  2. Partner Protection
    The cover will pay the business a lump sum
  3. Sole Trader Protection
    The cover will pay the individual a lump sum
  4. Overdraft Protection
    The cover will reimburse the interest accrued monthly on the business facility
  5. Loan Protection
    The cover will reimburse the business a monthly benefit to meet a regular payment
  6. Mortgage Protection
    The cover will reimburse the business a monthly benefit to meet a regular payment
  7. Recruitment Agency Fees
    The cover will reimburse the fees incurred by the business to hire a replacement executive
  8. Executive Salary Replacement
    The cover will reimburse the business of the salary paid to the replacement executive on a monthly basis
  9. Rehabilitation Costs
    The cover will reimburse the business of the costs incurred in providing rehabilitation to the disabled person
  10. Sole Trader protection
    The cover will pay a monthly benefit to the individual trading as himself/herself
  11. Accidental Death
    The cover will pay the business a lump sum


How does the cover operate? ^top

  • Benefits are paid to the business on a reimbursement basis only
  • Benefits are paid over a 12 month period
  • An excess of 30, 60 or 90 days applies (excluding sections 1,2,3,9 and 11)
  • The indemnity limit, as stated in the policy schedule, is the total for all sections; then once the limit per insured person has been exhausted, the cover will cease
  • The insurer will handle all claims or appoint its agents to adjust the loss where this is necessary.


What are the benefits to the insured company? ^top
When illness or injury prevents the insured person from undertaking usual duties, Business Protection cover assists the insured company:

  • In meeting the ongoing financial commitments of the business, such as mortgage, lease, overdraft or loan;
  • To seek and hire a suitable replacement;
  • To continue trading uninterrupted, thereby preserving the value of the business;
  • With reimbursement of rehabilation costs.