“Mortality Salience” is a phrase most have probably not heard until recently. Undeniably it’s morbid, but as the coronavirus outbreak continues, more individuals are relating to it; the awareness that their death in inevitable.
A microscopic virus has caused the greatest economic collapse since the Great Depression. The enforced lockdown aims to prevent the death toll spiralling to the millions seen in the flu pandemic of 1918. Mercifully, it appears these extreme measures are working. However, whatever happens in the coming weeks in terms of easing the lockdown, there is no denying that the pandemic, and the never-ending news coverage that goes with it, has made everyone aware that unforeseen events occur, often with extremely dramatic consequences.
The most distressing event to happen to a family or a business is the death of an owner / shareholder. Business owners are fortunately, able to tax-efficiently provide themselves and their families with protection. Relevant Life, a form of term life insurance, can provide protection for company employees up to the age of 75. It’s extremely tax efficient, with deductible premiums presented as an expense against company corporation tax, not a benefit in kind for the life insured.
A relevant life policy could provide peace of mind that loved ones will be protected after their death. It could also replace less tax efficient life policies like mortgage protection policies or straight term life policies.
The Covid-19 pandemic has forced working practices to change and highlighted the importance of certain key employees to business profitability. A KeyPerson Protection policy can protect a business from the potential subsequent drop in revenue caused by death or serious illness of certain key employees. It’s common for these policies to include critical illness, allowing a business to survive while a key employee completes treatment before returning to full time work. These policies can be tax efficient and provide comfort; a business can survive even with a key employee out of action.
Possibly the most difficult situation for a company is the death of a major shareholder director, especially if no prearrangement has made. Occasionally a spouse with no involvement inherits business shares with no desire to keep them, causing great difficulty for other shareholders wanting to purchase them to maintain the company’s viability.
Without provisions in place for such an event, other basic company operating elements may cease without a director with decision making and signing powers. Very few companies have a business lasting power of attorney, which allows a company to keep operating after the death of a company director. A Shareholder Protection policy can protect a business from these events; established in conjunction with accountants and solicitors to review the articles of association, shareholder agreements and build a business lasting power of attorney.
During this troublesome time, it is natural for business owners/shareholders to be more wary of the future viability of their businesses, rather than insuring against unforeseen risk. While this is understandable, Covid-19 has shown us the grim reality that astonishing events occur with devastating consequences.
It’s wise for business owners to remember this as things return to normal and to examine their own situation in terms of protection, both personal and business.