Protecting Your Business and Your Family: Life Insurance Options for Limited Companies

23/12/2024

If you own a limited company, you may be wondering about the benefits of taking out life insurance through the company. Not only can it provide valuable protection for you and your family, but it can also offer significant tax advantages. In this post, we’ll explore some of the benefits of taking out life insurance through a limited company, with examples of relevant life plans, executive income protection, and shareholder protection.

Relevant Life Plans

A relevant life plan is a type of life insurance policy that can be taken out by a limited company on behalf of its employees or directors. It’s a tax-efficient way to provide life insurance as a benefit to your employees, without it being taxed as a benefit in kind. The premiums paid for the policy are also tax-deductible for the company, which can help reduce its corporation tax bill.

Let’s say you’re a director of a limited company and you want to provide life insurance for yourself as a benefit. With a relevant life plan, the company pays the premiums for the policy, and the benefit is paid tax-free to your beneficiaries if you pass away. This can be a valuable way to protect your family financially, while also providing a tax-efficient benefit for yourself as a director.

Executive Income Protection

Executive income protection is a type of insurance policy that can be taken out by a limited company to provide income protection for its employees or directors. It’s a tax-efficient way to provide protection for your income in case you become unable to work due to an injury or illness. The premiums paid for the policy are tax-deductible for the company, which can help reduce its corporation tax bill.

Let’s say you’re a director of a limited company and you become unable to work due to an injury or illness. With executive income protection, the policy would pay out a regular income to replace your lost income. This can help you and your family maintain your standard of living while you’re unable to work, without having to rely on savings or government benefits.

Shareholder Protection

Shareholder protection is a type of insurance policy that can be taken out by a limited company to protect the business in case one of its shareholders passes away or becomes critically ill. The policy provides a lump sum payment that can be used to buy back the deceased or critically ill shareholder’s shares from their estate. This can help ensure that the remaining shareholders retain control of the business and can continue to operate it without interference from the deceased or critically ill shareholder’s estate.

Let’s say you’re a shareholder in a limited company and you pass away unexpectedly. Without shareholder protection, your shares may be inherited by your beneficiaries, who may not have any interest in the business or may want to sell the shares. This can create complications for the remaining shareholders and the future of the business. With shareholder protection, the policy can be used to buy back your shares from your estate, ensuring that the business can continue to operate smoothly.

In conclusion, taking out life insurance through a limited company can offer significant tax advantages and provide valuable protection for you and your family. Whether you’re looking for relevant life plans, executive income protection, or shareholder protection, it’s important to work with a financial advisor who can help you choose the right policies for your specific needs.