This is a summary of some different types of protection cover that are available:
A Life Policy pays a cash lump sum on the policy holder’s death during the policy term. This can be taken out on a level, decreasing or increasing basis.
Critical illness Policy
A Critical illness Policy pays out if during the policy term if the policy holder is diagnosed with a critical illness that meets the insurance company’s policy definition. This can be taken out on a level, decreasing or increasing basis.
Income Protection Policy
An Income Protection Policy pays a monthly cash sum if the policy holder cannot work and suffer a loss of earnings due to illness or injury. This means that the policy holder cannot perform, on a full or part-time basis, the duties of their occupation.
Relevant Life Policy
A Relevant Life Policy is a tax-efficient way for an Employer to provide a cash lump sum for an Employee’s family and dependants, on death or terminal illness, whilst the Employee is still employed by the business. The term “Employee” includes a director and an officer of a company but does not include a partner in a partnership, a member of an LLP or the sole trader.
Premiums paid to a qualifying Relevant Life Policy will normally be tax-deductible for the Employer and will not be assessable on the Employee. The sum assured, when paid, will not be subject to income tax nor will it be included in the taxable estate of the Employee for inheritance tax (IHT).
Shareholder Protection Policy
A Shareholder Protection Policy helps the shareholders look after each other and their families in the event of death or serious illness (if cover is taken out)
Each shareholder takes out a policy on their own life to cover their share of the business, and a trust is set up for the benefit of the other stakeholders. A legal agreement is signed relating to the sale and purchase of each shareholder’s share of the business in the event of death or serious illness. When a shareholder dies and a claim is made, the insurance company pay the insured amount to the trust. The remaining shareholders could use the money to buy the deceased/seriously ill shareholder’s share of the business, so that the shareholder/ family receive the money from the sale of their share of the business.
Keyperson Protection Policy
A Keyperson Protection Policy helps a business keep trading in the event of the death or serious illness ( if cover is taken out) of a keyperson.
The business takes out a policy on the life of the keyperson. When the keyperson dies or becomes seriously ill, the business makes a claim and the insurance company pays the insured amount to the business. The business could then use the money to cover, for example, the cost of recruitment or loss of profits.
Private Medical Insurance Policy
A Private Medical Insurance policy provides the policy holder with quick access to private medical facilities and medical treatments at a time and a place to suit the policy holder.
A policy can be taken out by a private individual for their benefit and the benefit of their family members. In addition a business can take out a policy for the benefit of its employees and their families.
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Dominion Financial Management Ltd are a team of independent financial advisers based in Cheshire.
We are authorised and regulated by the Financial Conduct Authority, no. 763604
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Whilst every effort is made to ensure that the information contained within this page is correct, these notes are by necessity brief and of a generalised nature. We would recommend and provide specific personalised independent financial advice and investment advice prior to finalising any arrangement with you.
A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates, and tax legislation. This article is intended to provide a general appreciation of the topic, and it is not advice.