As a business owner, you work hard to build and grow your enterprise. But what if something were to happen to you or your business partners that would put your success and your family’s livelihood at risk? That's where business protection comes in. It allows you to focus on what you do best – running and growing your business – without constantly worrying about the “what ifs.”

What is business protection?

Would your business survive if you or one of your key employees became seriously ill? Should your business partner die, what would happen to their shares? How would you feel if, in the case of a shareholder’s death, their family members gained partial control of your business? Would your family be financially protected if you died?

If at least one of these questions keeps you up at night, it might be time to consider business protection.  

Business protection is like life insurance for your business. It helps safeguard its most valuable assets – its owners, shareholders and employees and helps ensure business continuity.

Business protection insurance provides financial support should anything happen to you or a key individual involved in your business, offering you peace of mind so you can focus on running and growing the business.

Why do I need business protection?

As a business owner, you want to be prepared for whatever the future holds. It's natural to prioritise immediate challenges like the current inflation rate. After all, inflation can have a direct impact on your day-to-day operations and profit margins. The same applies to common threats like fire and theft.

However, securing your business against other unforeseen risks like death or serious illness can be equally important, even if they seem unlikely.

If you have a family depending on your income, business protection becomes even more valuable. It not only helps safeguard the interests of your partners and shareholders if something happens to you, it potentially provides financial security for your family's future too. If you find yourself out of work due to illness, having business protection in place can also help protect you from a loss of income.

What are the benefits of business protection?

Running a business is a fulfilling and rewarding endeavour but it comes with inherent risks. While it’s easy to think that these scenarios won’t happen to you or your company, the reality is that they could. But with the right cover in place, you can minimise the financial impact should you or another key member of your business get sick or pass away.

Help with financial security

In the case of a key individual’s illness or death, business protection can help safeguard your business's financial stability by providing funds to repay outstanding loans, cover profit loss and replace that key individual.

Business continuity

It can help your business to continue operating by helping to prevent ownership issues or control disputes if you or a key shareholder passes away, which can potentially allow for a smooth transition and succession.

Peace of mind

Best of all, business protection can potentially provide you, your family and your partners with financial security, offering some peace of mind in the face of unforeseen events.

Depending on your needs and business structure, there are two main types of business protection insurance you can consider: keyperson cover and shareholder protection.

What is shareholder protection?

Imagine a scenario where your business partner dies suddenly. Without proper insurance, you could find yourself unable to make any business decisions without going through your partner's legal representatives. This can create delays, complications and frustration, ultimately impacting the smooth operation and growth of your business.

Personal shareholder protection ensures you have financial support and resources needed to navigate such situations, helping to ensure continuity and allowing you to make important decisions independently as a business.

With this type of insurance, all parties take out life assurance contracts. This means their share can be bought and the equivalent cash value will be given to their family. This way, shareholders keep control of the company, and the deceased’s family can be financially protected.

Alternatively, your company could opt for corporate shareholder protection. This involves signing a legal agreement with each shareholder, committing to buy back their shares in the event of their death. To ensure you have the funds for this, your company takes out life insurance policies on all shareholders. If a shareholder dies, the insurance money goes straight to your company, enabling you to buy back the shares from the deceased's family.

The advantage of corporate shareholder protection is that all costs are covered by the company, not individual shareholders. However, setting this up can be complex and must comply with certain legal and tax requirements.

What is keyperson insurance?

Do you have a key employee whose death or serious illness would impact the success of your business? Keyperson insurance, sometimes known as keyperson cover, can be used to hire their replacement or even continue to pay their salary. It helps ensure your business's profitability and survival.

If the insured person dies or is out of work from serious illness, the policy gives a one-time payment to the business. This money can be used to cover financial losses, find and train a replacement, or support the business during a transitional period.

What are the main differences between shareholder protection and keyperson cover?

Shareholder protection protects shareholders and partners, while keyperson cover protects the business from some of the extra costs incurred from losing a keyperson, helping to maintain the business’s profitability and survival.  

This means that if you have shareholder protection in place and one of your business partners dies, the remaining partners or shareholders can still retain control of the business. This not only protects the business, but it also protects the deceased business partner’s next of kin and ensures they receive the value of their business share. While, with keyperson cover, you can be sure your business carries on even if a key employee or shareholder is no longer able to work there.

Although it’s not a requirement to take out both types of insurance, shareholder protection and keyperson cover often go hand in hand in protecting your business.

No one can predict the future, but you can prepare for it. Although you may hope it won't happen to you, the truth is that unexpected illness and premature death affects people and businesses in Ireland every day.

Whether you're a budding entrepreneur or an established business owner, safeguarding your hard work and investments should be a top priority.

If you’d like advice on the best type of insurance to protect your business, chat to one of our trusted financial advisors. You can book a time and date that suits you using the booking form below. It’s also a good idea to talk to a professional tax and legal advisor about your personal circumstances.