What Will Shareholder Protection Insurance Cost My Company?
The cost of Shareholder Protection depends on various personal and policy factors.
The older you are, the more Shareholder Protection Insurance costs. This reflects the increased risk of death / critical illness during the policy term.
Smokers pay more than non-smokers for most protection policies. This is because they’re more likely to become ill — and seriously ill — than non-smokers. Smokers are also more likely to die early.
General State of Health
Insurers use your health and any pre-existing conditions to price cover. You might therefore pay higher Life Insurance premiums if you have high blood pressure, for example.
With Critical Illness Cover, if you’ve previously had a condition such as cancer, the insurer might exclude that type of cancer if it returns instead of increasing premiums.
Hazardous Hobbies / Activities
Most insurers charge more if you regularly participate in hazardous activities.
These could include skydiving, outdoor rock climbing, motocross, deep sea diving / caving / wreck exploration and other dangerous hobbies.
As for policy factors, the biggest influence on the price of Shareholder Protection Insurance is firstly the amount of cover you need. The higher the benefit, the higher your premiums.
Other important policy factors include:
The longer you anticipate being a shareholder and needing the cover, the higher your premiums.
This is because you’ll hold the protection to an older age and therefore face a higher chance of death / critical illness during this period.
Adding Critical Illness Insurance
Adding Critical Illness Cover increases your coverage considerably, paying out for common conditions such as cancer, heart attacks and strokes as well as if a shareholder dies.
However, as becoming critically ill is more likely than dying, it costs more to add it on.
Average Monthly Premiums for Shareholding Directors
Given insurers look at many factors when pricing premiums, it can be hard to pin down the exact cost of cover.
However, the table below has a rough guide to premiums which were taken from our instant online Shareholder Protection quote engine. To get these quotes, we’ve made a number of assumptions about each shareholder. For example, we’ve assumed they are:
- A healthy non-smoker
- A company director with office-based duties
- Seeking £150,000 of Life Insurance or £150,000 of combined Life Insurance and Critical Illness Cover
- Wanting level cover that won’t reduce in value over the policy term
- Looking for protection over the next 10 years.
As you can see, the cost of £150,000 of level Life Insurance over 10 years at 55 year old is more than three times the cost for a 35 year old.
However, as mentioned, the price goes up when you add Critical Illness Insurance. While fairly manageable for younger individuals, reflecting the lower chances of a younger people getting critical illnesses compared to someone older, premiums rise notably as you age.
The cost of combined Life and Critical Illness Shareholder Protection for a 55 year old is therefore almost five times that of a 35 year old.
The Importance of Premium Equalisation
These unequal premiums are an issue if you arrange cover using the own life under business trust route.
You must equalise Shareholder Protection Insurance premiums to prevent tax complications.
This is because HMRC generally considers unequal premiums as a transfer of value or gift from the shareholder(s) paying the most to those paying the least. Surviving shareholders could therefore end up with an inheritance tax bill on this ‘gift’ if one of them passes away.
Check out how to equalise Shareholder Protection premiums here ⟶