Business Protection Calculator
This calculator builds a business protection report the way an adviser would. Enter the business, the people you want to cover and any borrowing, and it works out the three covers a trading business normally needs.
Key Persons Cover protects the profit that depends on particular individuals. Life cover is calculated as five times the average net profit attributable to that person, or ten times salary where no profit share applies; critical illness cover is five times average net profit or five times salary. Ownership Succession works out what each owner’s shareholding is worth and how much the remaining owners would need to buy it. Loan protection totals the commercial mortgages, business loans, overdrafts and directors’ loan accounts that would need clearing, and applies them to everyone liable for the debts.
Profit is averaged over the last three years, and the guidance on structuring and tax changes according to whether you trade as a limited company, sole trader, partnership or LLP. The figures are an indication of the cover to consider, not personal advice or a quotation.
For advice on structuring the cover and getting the ownership and trusts right, see our business protection service.
Business details
Start with the business, then add the people you want to cover and any borrowing.
Last 3 years’ net profit before tax
Details of people to cover
Add each owner or key employee. Profit attributable is the share of profit that person generates; shareholding is what they own.
Commercial mortgages or loans
Include commercial mortgages, business loans, overdrafts and directors’ loan accounts. Maximum of 10 mortgages and loans.
Potential cover available
Key Persons Cover
A ‘key person’ is an employee whose loss would have a significant effect on the profits of the business. Life Cover is calculated as 5× average net profit attributable to them, or 10× salary where no profit share is entered. Critical Illness Cover is 5× average net profit or 5× salary.
Ownership Succession
Ownership Succession ensures that if an owner dies or has to retire due to a critical illness, the remaining owners receive a tax-free cash lump sum – and have the necessary ‘option’ – to buy the deceased or retiring owner’s shares.
Loan protection
Cover to repay the business borrowing if a person who is liable for the debts dies or is diagnosed with a critical illness. Lenders will often allow the full commercial debt to be covered on each life.
Total potential cover
This calculator produces an indication of the cover a business might need. It is not personal advice, a recommendation or a quotation. The right ownership, trust arrangements and tax treatment depend on how the business is set up and on each owner’s circumstances. Speak to us and to your accountant before putting cover in place.
Protect the People Your Business Depends On
Business protection is as much about the paperwork as the premium. Cover without a cross option agreement leaves the survivors unable to buy, and a policy owned by the wrong party can create an unnecessary tax charge.
Leave your details and one of our specialists will review your ownership structure, borrowing and key people, and set out what cover you need, who should own it and how it should be written.