Business Loan Protection Insurance

What’s The Risk Of Death?

We’ve used Office for National Statistics (ONS) data for the table below detailing the risk of death in the next 10 years for a range of ages.

We’ve used the same data to build a Life Expectancy Calculator where you can work out your own personal risk of death 😵.

What’s The Risk Of Suffering A Critical Illness?

The ‘big three’ illnesses make up around 80% of Critical Illness claims: cancer, heart attacks and strokes.

• Around a quarter of new cancer diagnoses each year are in people aged under 60 (Cancer Research UK).
• Meanwhile, almost 1 million people in the UK have survived a heart attack and more than 1.2 million people in the UK have survived a stroke or transient ischaemic attack (TIA). Almost half of these are under the age of 75. (British Heart Foundation).

While Critical Illness Insurance covers serious illnesses, it doesn’t cover less serious conditions, even if they stop you working. This could include, for example, mental health conditions or musculoskeletal problems.

For protection against a greater range of illnesses, many directors and small companies turn to Exectuive Income Protection. This offers a continuation of income if you are unable to work due to accident or sickness. What’s more, it can also protect your personal finances as well as covering a business loan if you fall ill.

How Much Cover Do I Need?

You’ll want to match the outstanding loan balance to the sum assured so you’ll receive a lump sum to cover your debts.

Level Or Decreasing Business Loan Protection?

Whether you need level or decreasing cover will depend on your loan.

• Decreasing cover
  Falls alongside a capital repayment loan, reaching zero just like the loan balance by the time you repay the loan.
• Level cover
  The benefit stays fixed and is usually used for an interest-only loan, where you don’t repay the principal capital until the end of the loan. Level cover ensures the insurance always covers the outstanding debt, right until the end of the loan.

How Much Does Business Loan Protection Cost?

The cost depends largely on the amount of cover you need and whether it needs to be level or decreasing.

The insurer will determine your premiums by asking questions about your:

• Health and medical conditions
• Age
• Lifestyle (e.g. smoking and drinking habits)
• Job (riskier occupations tend to cost more to insure).

We have calculated the monthly cost for a £150,000 commercial loan which decreases over a period of 10 years. The person in question is a healthy non-smoker aged 35, 45 and 55.

How Does HMRC Tax It?

Business Loan Protection premiums are not typically a tax-deductible business expense. This is because HMRC does not class the payout as ‘wholly and exclusively’ for the benefit of the business as the payout goes to the lender. Rather, HMRC treats premiums as part of the cost of raising capital.

So, in brief, while you usually have to pay tax on insurance premiums, the payout is typically received tax-free because it benefits the lender, not the business.

Do I Need To Write It Into Trust?

A trust is a separate legal entity from your business. You might use a trust to receive funds from certain insurance policies to keep a payout separate from your company for tax or other purposes.

However, generally speaking, you don’t need to write Business Loan Protection into trust. This is because a trust would actually complicate matters in the event of a claim.

You want the payout to go straight to the lender to settle your outstanding debt, not to be held up in a trust. Moreover, as there’s not usually any tax due on a payout from such a policy, writing it into trust is of little use.

Who Are The Best UK Business Loan Insurance Companies

At Drewberry, we work with every single leading UK insurer offering this type of cover. When undertaking a market review we’ll source quotes from:

• Aegon
• AIG
• Aviva
• Legal & General
• Liverpool Victoria
• Royal London
• Scottish Widows
• Vitality
• Zurich
  

It’s really important to compare quotes from all the leading insurers. If you simply take the quote offered by your bank / lender, you may not get the benefit of whole-of-market research and therefore pay more in premiums than necessary.

Additional Insurance Benefits

Insurers often include additional benefits alongside the core cover. These can include:

• 24 / 7 virtual GP service
• Physiotherapy sessions
• Counselling and stress helplines
• High street discounts and rewards for healthy living.

Compare Business Quotes & Get Expert Advice

Setting up this cover can be complicated. This is especially the case when looking at the level of cover you need and the tax position.

Why Speak to Us?

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

• There is no fee for our service
• We are award winning 🏆 independent insurance advisers who work with all the leading UK insurers
• You’ll speak to a dedicated expert from start to finish
• We are very proud of the 3325 and growing independent client reviews rating us at 4.92 / 5
• We are authorised and regulated by the Financial Conduct Authority. You can find us on the financial services register here 🧐
• Claims support when you need it most
• A personalised benefits page for your business 👍

If you need help setting up Business Loan Protection give us a call on 02084327333 or email help@drewberry.co.uk.