Getting started in the business protection market. For financial advisers only. We ll help you get there

Transcription

1 Getting started in the business protection market For financial advisers only investments pensions PROTECTION We ll help you get there

2 At Old Mutual Wealth, we have been protecting other people s businesses against some of their financial risks for many years. Our experience tells us that financial advisers can find this market rewarding in many ways, but that it can be difficult to enter it from scratch. We hope that this brochure will help you take your first steps in the business assurance market, and this will be the start of a long and successful enterprise. You can find more details about many of the topics mentioned here in our guide Protection for your corporate clients. When you need more information about a particular point, you can call us on: Technical helpline Underwriting helpline To help you understand how it works in practice, we have used a fictitious business, MJE Technology, to illustrate examples of the different covers and their benefits. 2

3 What is business protection? Business protection is about protecting businesses and their owners against the financial effects of losing a key person from the organisation. You can protect them against: a reduction in profits following the loss of a key manager or employee the effects on their borrowings of losing an essential member of their team the effects on the shareholders or partners following the loss of one of their number. These are risks which most companies do not automatically think of covering. Unlike their cars or buildings, they do not often consider their people to be company assets against whose loss they should insure. But it can be much easier to get another car or piece of machinery than to replace a key member of the team. What business protection does for the organisation Large companies usually have an extensive management team, so if one of them dies or has to stop working due to illness, there are others who can step into the breach and keep things going. So the effects on the dayto-day running of the business, their profits and their loans are not disastrous for them. This is not usually the case, however, for small- or medium-sized businesses. Here, the loss of a key manager or guarantor of a loan can be disastrous. Business protection provides cash to help these organisations overcome the financial effects of losing a key team member. How business protection can help the individual Sole traders are in a very vulnerable position should they fall seriously ill. If they were unable to work for a long time, their income would fall significantly and they might even lose their livelihood completely. So insuring against serious illness or death would be a sensible move for them. Protection for partners or shareholders When one of the owners of a small to medium enterprise (SME) dies or is too ill to work, they or their family will want to realise the value of their stake in the business to provide ongoing income. But for most SMEs, the shares will have no market outside the remaining owners of the business. The management team will want to retain control of the business, rather than having a co-owner who has no interest in, or experience of, it. Shareholder or partnership cover can provide the remaining owners with the cash to buy the shares when they become available. 3

4 EXPLAINING THE CRITICAL ILLNESSES Why business assurance is needed Although we all confidently expect to live for years after we retire, the reality is that many of us do not. Statistically, if a business has five key people or shareholders in their early 40s, there is a 25% chance that one of them will die before they are 65. This table shows the likelihood of an essential team member dying before they retire at age 65. Age Number of lives % 12% 17% 23% 27% 47% 40 6% 11% 16% 21% 26% 45% 45 5% 11% 16% 20% 25% 43% 50 5% 10% 14% 18% 23% 40% Based on TMC00 ultimate mortality. MJE Technology Ltd is a private limited company, with three owner-directors Brian Marsh the Managing and Technical Director, David Jones the Sales Director and Peter Edwards the Financial Director. The company has about 50 employees, and is a supplier of electronic components to the aerospace and defence industries. The company has grown rapidly over recent years, and the expansion looks set to continue. In subsequent sections, we shall consider the financial risks the business faces, and what can be done to offset their effects. 4

5 The opportunities Because most SMEs have little or no business protection cover, the potential market is very large. In the UK, it has been suggested that the business protection shortfall is currently in excess of 1.3 trillion. t only are there many businesses out there who need this type of cover, but the policies written in this market tend to be for older lives, who need relatively high sums assured. Of all the life cover we have written for directors, 70% is for ages between 40 and 60, and the average sum assured is over 500,000. How to get started Once you have decided that this could be a market for you, the first step is to identify some potential clients. You will almost certainly have some possible candidates in your existing client base. Every client who has described themselves as a company director, business owner, partner or sole trader will be involved in a business which may need protection. You may also be able to get referrals to potential business clients from general brokers who arrange their car, buildings and plant or public liability insurance. Solicitors and accountants can also be fruitful sources of leads. You may also find leads through local associations such as Rotary Clubs, Chambers of Commerce, business women s associations and golf clubs. Once you have identified some prospects, the next step is to set up a meeting and identify the risks the business is facing. You can do this by asking questions such as: if you were ill, would your business recover from the loss of profits caused by your absence? do you want to risk adding your business s financial problems to your health problems, allowing stress to delay your recovery? how sympathetic would your bank be if illness or death affected your ability to repay your loan? Who would make sure that the company stayed profitable if you were no longer there to do it? When you are talking about protecting shareholders or partners, you might ask them: have you made plans for who would take over if you were suddenly no longer around? What contingency plans have you put in place in case one of your fellow shareholders or partners falls seriously ill or dies? Would you and your colleagues be able to keep control of your company if a major shareholder died? do you know how much your share of the business is worth today? Questions like these can help your clients appreciate the financial implications of the risks their business is running. 5

6 Types of cover Once your client has accepted that their business is at risk, you need to determine which type or types of cover they need. Since they may not wish to take all the cover at once, you also need to prioritise their needs. The three types of insurance they might need are: cover for their key people cover for their borrowings protection for the partners or shareholders. 6

7 Key person cover The aim of key person cover is to protect the business against the effect on its profits of the loss of a key director, partner or employee through illness or death. The flowchart at the end of this section will take you through the steps of setting up key person assurance, and the questions you need to ask. Who should be covered? A business will usually identify its managing director as a key person whose absence should be covered. But there are many more potential key people within most organisations. Obviously, the business may not wish or be able to afford to cover all of them, but each should be considered. These include: all the other directors senior managers and project leaders department heads anyone else who would be difficult to replace, and whose absence would have an adverse effect on profits. What type of policy? The next decision is about the sort of cover needed. This might be critical illness cover, life cover, or a combination of the two. The cover does not have to be the same for each key person. For some key people, the owners might decide that life cover is sufficient, while they may want critical illness plus life cover for other people whose absence would have a greater effect on profits. 7

8 Key person cover (continued) How much cover? The amount of cover needed will also vary between key people. There are several accepted ways to calculate how much cover each person should have. These include apportioning the profits between the key people, a multiple of salary, a percentage of profits, and a calculation based on the payroll. You can find more about each of these methods in our guide Protection for your corporate clients. You can use our online tool to help you decide which method is best for your clients, and to work out the amount of cover needed for each person. You can find this calculator on business assurance It includes worked examples of each calculation method to help you choose the most appropriate, and will tell you our medical and financial underwriting needs for each individual. How long should it last? The term of the cover can vary significantly between different key people. For employees, it is normally for five to ten years, as the business, the key people and their value to it are likely to change within quite a short period. However, your clients may prefer to have a longer term for the directors and owners of the business. It may be possible to use a whole life plan for key person cover for a business owner, and for the company to assign the policy to the life assured on retirement, at a time when he or she would find it difficult to get further cover due to age or poor health. Since MJE Technology has only three owner/directors, if one of them died or had to leave due to a serious illness, the effects on their profits could be very serious. They also realise that the absence of Andrew, their production manager, could have an adverse effect in the short term on their ability to meet orders, so they could lose business if anything happened to him, and cashflow could be affected. Because they are all in their 40s, they understand that statistically there is a 25% chance of one of them dying before they are 65. They decide to take critical illness with life cover for each of the three directors, and life cover only for Andrew. For Brian, David and Peter, they choose fixed term cover to last until their 65th birthdays, as they do not intend to leave the company or retire before then. For Andrew, they choose five-year fixed term cover, and will review the need for cover in five years time. The amount of cover they decide on for each key person is: Brian Marsh 300,000 David Jones 200,000 Peter Edwards 100,000 Andrew Stewart 50,000 8

9 How much will it cost? The cost for each key person s insurance will depend on the type, amount and duration of the cover. Many of the key people covered will be in their 40s or 50s and, if the business is successful, the amount of cover needed may be relatively high, so the premiums may appear costly. However, our experience shows that presenting the total cost of covering all the key people as a percentage of the turnover or total payroll is a good way to put the premiums into context as a justifiable business expense. How to set it up MJE Technology Ltd has a turnover of 4.5 million a year. The cost for the three directors is as follows. They are all non-smokers and in good health. Brian David Peter Age Sum assured 300, , ,000 Yearly premium 3, , Total yearly premium = = 0.11% of annual turnover. This is how key person policies should be set up: Policyholder or owner Life assured Who gets the benefits? Written in trust? Tax: company Tax: key person the company the key person the company no possible if tax relief is taken on premiums none 9

10 Key person cover (continued) Taxation Under the Anderson rules, if key person cover meets certain criteria, the premiums paid may be tax-deductible. The criteria are: the only purpose of the cover is to offset profits lost due to the key person s absence so none of the benefits should be intended to repay a loan the relationship of the key person to the business is employee to employer so the key person cannot be a director or owner of the company the policy has a fixed term of five years or less. If these criteria are met, and tax relief is taken on the premiums, any benefits paid will be treated as trading receipts and may be subject to corporation tax. However, if the business does not claim tax relief on the premiums (or it is not available because the contract does not meet all the criteria) the benefits will not be taxable. Where tax relief might be available, you need to discuss with your clients which is the best course for their particular circumstances. Our guide Protection for your corporate clients includes sample letters for your clients to send to HM Revenue & Customs (HMRC) to establish the business s tax position for this cover. Should corporation tax potentially be payable on the benefits of the policy, clients with Protect cover can opt at outset to take the cash in four equal yearly instalments, if this would be tax-advantageous for them. Flexibility is important When choosing a provider for your client s key person cover, it is essential that the policy is flexible enough to change as the business s needs alter. Few key employees stay with the same company throughout their working lives, so ease of cancelling one policy and adding cover for a new employee into the plan is needed. A Protect plan can include an unlimited number of policies for separate key people, and the cover for each can be quite different. As a business grows, the value of its key people usually increases, and more cover is needed. So the policy should include options to increase the cover each year to offset the effects of inflation, and to make one-off increases. For both, there should be no requirement for further health evidence. The increase should be made to the existing policy (rather than issuing a new, separate policy) so that the same benefits and conditions apply to all the cover. 10

11 Key person cover the questions you need to ask your clients Has the business got any key person cover? Are all the key people covered? Is the business a limited company or limited partnership? Does the business need loan or partnership/shareholder cover? How many key people are there, and who are they? For each of them: How long is the cover to last? Set up the cover under trust with the other partners as beneficiaries. Advise the partnership to consult their legal adviser regarding putting a binding commitment in place to use the cash sum for the benefit of the partnership. For more information see our leaflet Partnership or shareholder cover the questions you need to ask your clients. Do you know how much cover is needed for each key person? For each key person, do they want: Life and/or critical illness cover? Total permanent disability benefit? Premium protection benefit (waiver)? Cover reinstatement option? Use the key person calculator on to work it out. Who is to be the named contact from the business? Completing the application The company or limited liability partnership is the policyholder. Each key person is the life assured of one of the policies. Don t write the policies in trust. If you are applying by paper you can cover two key people on each application form, using two of the policies in the plan. If there are more than two people and the business wants to write all the policies in one plan, use our form Applying for additional Protect policies and fix them firmly together. 11

12 Business loan cover Businesses who borrow cash need this cover to protect their ability to repay their loans should one of their key people have an illness or die. The lender will often make it a condition of the loan that cover is in place for the directors and key employees before they release the funds. This cover is particularly important for those individuals who are guarantors of the loan. If the business were to default on the loan, their family s future and even their home could be jeopardised. Who should be covered? The company should consider covering anyone whose absence through illness or death would adversely affect its ability to repay its loans, or its lender s willingness to allow the loan facility to continue. So, for example, the loss of the owner of a small business may cause its bank to ask that the loan is repaid sooner than expected, because they expect that the company will struggle without its leader. What type of policy? The choice is the same as for key person cover and, again, the company may decide to cover some people for both critical illness and life cover, but only to have life cover for those whose loss would have a lesser effect on the loan. The policy must be able to be assigned to a lender, if this is a condition of the loan. How much cover? For each person covered, the sum assured should be the full amount of the loan, so that it can be completely repaid if any one of them dies or is seriously ill. The initial sum assured will be the amount of the loan at that time. It is essential that the policy is flexible enough to cope with increases in borrowings in the future. It should contain options both to increase the cover annually, and for larger one-off increases when needed. These increases should be free of health evidence, and made to the existing policy so the same options and definitions etc apply to the whole of the cover. How long should it last? A fixed term policy is usually used for loan cover, and its term should match the duration of the loan. Lenders will usually set this at between five and ten years. MJE Technology need a bank loan facility of 175,000. Their bank insists that insurance is in place before they will release the cash. Each person insured will need cover for the full amount of the loan. Brian, David and Peter are all guarantors of the loan, and are particularly concerned about the financial security of their families and homes should something happen to one of them. They also know that, if anything happened to their production manager, Andrew, it could seriously affect cash-flow, as they would have a problem in meeting orders until they could replace him. This might affect their ability to keep up the repayments on the loan. So they decide to take critical illness and life cover for each of the three directors, and life cover for Andrew. Since the initial term of the loan is for five years, they choose a five-year fixed term for each of the policies, with options to increase the cover should their borrowings rise. Each policy has a 175,000 sum assured at outset. 12

13 Putting the cost into context Like key person cover, the cost of loan cover will depend on the amount of cover, the term, and the age of the lives assured. Again, if this is presented to your clients as a percentage of their turnover, or compared with the cost of servicing the loan, it may be easier to justify the cost. MJE Technology Ltd has a turnover of 4.5 million a year. The cost for the three directors is as follows. They are all non-smokers and in good health. Brian David Peter Age Sum assured 175, , ,000 Yearly premium Total yearly premium = 3, = 0.07% of annual turnover. How to set it up This is how key person policies should be set up: Policyholder or owner Life assured Who gets the benefits? Written in trust? Tax: company Tax: life assured the company the guarantor or key person the company no no relief on premiums; so no tax on benefits none Losing business to lenders When they insist that cover must be in place before the loan can be issued, lenders may try to convince your clients to take out the insurance they can provide. This has potential disadvantages, both for you and your clients. From your point of view, you will lose the revenue from a highvalue policy and, once the lender has a toe-hold, they may try to take the rest of the client s business from you. The clients, on the other hand, may not get the ideal cover for their particular needs, as some lenders are tied to only a few providers, or even just one. Your recommendation from the market will ensure that they have the best cover for them, and which will be able to change as their business progresses. One of the inducements the lender may offer is the ability to get the cover on risk quickly, to avoid delaying the release of the loan. Our immediate cover facility can help you counteract this. Subject to certain limits on age, health and sum assured, we can put your clients on risk for business insurance straight away, while we are collecting any medical evidence needed. We also offer simplified acceptance for loans from approved UK lenders. Provided that the loan meets certain criteria, the only financial evidence we need is a confirmation letter from the lender. You can find more about immediate cover and simplified acceptance in our guide Protection for your corporate clients and our leaflet Old Mutual Wealth for quick and easy loan protection cover. 13

14 Business loan cover the questions you need to ask your clients Has the business got any existing loan cover? Does it cover the full loan amount? Is the business a limited company or limited partnership? Does the business need key person or partnership/ shareholder cover? How many guarantors for the loan are there, and who are they? For each of them: How long is the cover to last? Set up the cover under trust with the other partners as beneficiaries. Advise the partnership to consult their legal adviser regarding putting a binding commitment in place to use the cash sum for the benefit of the partnership. For more information see our leaflet Partnership or shareholder cover the questions you need to ask your clients. How much cover is needed for each life assured? For each life assured, do they want: Life and/or critical illness cover? Total permanent disability benefit? Premium protection benefit (waiver)? Cover reinstatement option? The business nominates one person to be the named contact. Completing the application form The company or limited liability partnership is the policyholder. Each guarantor is the life assured of one of the policies. Don t write the policies in trust. If you are applying by paper you can cover two separate lives on each application form, using two of the policies in the plan. If there are more than two people and the business wants to write all the policies in one plan, use our form Applying for additional Protect policies and fix them firmly together. 14

15 Partnership or shareholder cover Unlike the other forms of business protection, partnership or shareholder insurance covers individuals rather than the company. Its aim is to provide the funds for the remaining owners to buy the shares of a partner or shareholder who dies, or is no longer able to work due to a serious illness. It ensures that control of the company stays in the hands of the current owners, and that the family that inherits the shares receives their full value. Without this type of cover, control of the business could pass to someone who has no experience of, or no interest in, running the business, or who would wish to run it in a way unacceptable to the other owners. If the people who inherited the share wished to sell it rather than becoming involved in the business, they might have problems finding a buyer if the existing owners did not have the funds for the purchase. There is often no market for the shares outside the remaining owners of the business. Who should be covered? Each person who has a significant share in the business should be covered, whether they are a major or minor shareholder. The only shareholders who do not need cover are those with a very small shareholding, whose value is low enough for the other shareholders to be able to buy them out without needing extra funds. For a partnership, all the partners should be covered. What type of policy? The shareholders or partners must decide between life cover and critical illness cover (with or without life cover) for each person. As with other forms of business insurance, the type of cover does not have to be the same for each person covered. Particularly for older lives assured, cost may be an influencing factor in their choice. How much cover? Each person should be covered for the full value of their share of the business. Companies usually get a professional valuation in order to establish the sums assured needed. Since the value of a company can change, the policy should have the flexibility to accommodate this, both through annual inflation-proofing increases, and through large single increases. Again, clients should be able to increase without giving further health evidence, and the increase should apply to the existing policy to keep the same benefits and conditions for all the cover. How long should it last? The cover will usually last until the selected retirement age of each life assured. As well as fixed term cover, insurance that can last throughout life is often used for partnership or shareholder protection. Your clients may wish to consider having cover which can last after retirement, so that the policy can be assigned to the life assured to provide cover at a time when they might find it difficult to take out a new policy. 15

16 Partnership or shareholder cover (continued) How to set it up Depending on the number of lives to be covered, partnership and shareholder cover can be set up in different ways. The flowchart at the end of this section shows the different options, and the steps needed to set up the cover. Life of another This is suitable for smaller organisations, where only two or three people are to be covered. Its advantages are that it is simple to set up and, since no trusts are needed, there are no potential inheritance tax (IHT) charges. However, this method is less flexible should the company change in the future and more partners or shareholders need to be added. Setting up the cover This is how key person policies should be set up: Policyholder or owner the partner or shareholder Life assured(s) the other partner(s) or shareholder(s) Written in trust? no Who gets the benefits? the policyholder Tax implications none Company or partnership involvement none MJE Technology has three major shareholders. Brian owns 48% of the company, David has 30%, and Peter owns 20%. The other 2% is split between several long-standing employees. Each of them is married and, if they died, their wives would inherit their share of the business. However, none of their wives has ever been involved in the business, and each has her own career in a different field, so they would wish to sell their husband s share of the business to his co-directors. ne of the directors has sufficient cash to buy out another director s share, so they need insurance to provide a lump sum should the worst happen. The current value of MJE is 1 million, so the cover needed is: Brian 480,000 David 300,000 Peter 200,000 16

17 As MJE Technology has only three major shareholders, and they do not expect this to change in the future, they decide to use the life of another method to set up their cover.the diagram below shows how the policies are set up, and who are the policyholders and lives assured for each policy. Brian Marsh Policy A life assured Policies B and C policyholder Policy A Policyholders David and Peter Life assured Brian David Jones Policy B life assured Policies A and C policyholder Policy B Policyholders Brian and Peter Life assured David Peter Edwards Policy C life assured Policies A and B policyholder Policy C Policyholders David and Brian Life assured Peter Writing the cover in trust The other method of setting up partnership or shareholder cover is to write a policy on the business owner s own life, written in trust for the other owners. This method is suitable for a business of any size, with no limit on the numbers of lives assured. This is how key person policies should be set up: Policyholder or owner Life assured Written in trust? Who gets the benefits? Tax implications Company or partnership involvement the partner or shareholder the partner or shareholder yes the trustees, for the beneficiaries potential none We offer a choice of trusts suitable for business protection. The flowchart gives more details, including the advantages and disadvantages of each. If the people to be covered choose rolling term cover, with premiums reviewable every ten years, it can last as long as they want to keep the cover, with no upper age limit. Each person would, therefore, have the option to keep the cover after they retire, when they would find it hard to get more insurance. 17

18 Partnership or shareholder cover (continued) Partnership or shareholder cover trust selector See also our leaflet Old Mutual Wealth s absolute and discretionary trusts at a glance Does the life assured need future flexibility if more partners or shareholders join the business? Discretionary business assurance trust Is the life assured prepared to pay regular charges on the trust? Advantage: Flexibility the potential beneficiaries are always the other partners or shareholders at the time the benefits are paid. Disadvantage: Potential ten-yearly periodic and exit charges. For more information see our leaflet Effective planning with regular premium life policies. Might the settlor want the policy to be assigned back to them when they retire, or if they leave the business? Include the settlor as a potential beneficiary Pre-owned asset tax (POAT) may be payable. Exclude the settlor as a potential beneficiary Advantage: potential ten-yearly periodic or exit charges. Absolute or bare trust Disadvantage: Inflexible can t be changed if potential beneficiaries change in the future. If a beneficiary dies before the settlor, the value of their share of the trust is considered to be part of their estate, even though the settlor is still alive and they have not, as yet, received any actual benefit from the trust. There could, therefore, be a potential IHT liability on the beneficiary s estate. A cross-option agreement will ensure that the funds are used for their intended purpose, and that the inheritors will sell the shares on request. For more information see our leaflet Effective business protection without a trust and the illustrative cross-option agreement on where you can also find the trust documents. For more information on pre-owned asset tax and using multiple trusts go to the Tax & Trusts section on 18

19 The three directors of MJE Technology each set up a cross option agreement. As they have critical illness cover as well as life cover, their agreement includes a single option agreement which will be used if they claim for a critical illness. This will ensure that there is a buyer for their share of the business should they die or want to sell their shares after becoming ill, and that their fellow directors will have the funds available to buy the share from the beneficiaries of their will. Cross-option agreement A double option agreement ensures that the beneficiaries of the trust use the cash to buy the shares, and that the inheritors of the shares will sell them if asked to. If critical illness or total permanent disability cover is included in the policy, a single option agreement is used. Under this, the other owners agree to buy the shares of their colleague when asked to, but cannot demand that they are sold. We have a cross option agreement that automatically includes a single option agreement for policies with both life and critical illness and/or disability cover. You can find more details about double and single option agreements in our guide Protection for your corporate clients. Premium equalisation If each person covered by the insurance were to pay their own premium, the oldest person is likely to pay the highest amount. But, because they are the most likely to die first, they are the least likely to benefit from the arrangement. In order for HMRC to accept the plans as a commercial arrangement, you need to equalise the premiums so that each person covered pays their fair share in line with their likelihood of benefiting from the cover. We have a simple tool to help you do this, which you can find on business_assurance You can find more details about premium equalisation in our guide Protection for your corporate clients. 19

20 Partnership or shareholder cover (continued) Taxation Since the company is not normally involved in the arrangement, premiums are usually paid by the individual, and no tax relief is available. If the premiums are paid by the company, they will be classed as a P11D benefit for the policyholder. tax is due when the benefits are paid. If the settlor is included as a possible beneficiary of the trust, pre-owned asset tax (POAT) may be payable on the retained benefit. When a policy is written under a discretionary trust, such as our business trust, periodic charges and an exit charge may be due if the value of the policy is higher than the nil-rate band for inheritance tax. You can find information about all these points in our guide Protection for your corporate clients or on Brian, David and Peter want the premiums for their cover to be paid by MJE. This means that the value of the premiums paid will be classed as a P11D benefit for each of them. If they had decided to write their policies under trust, rather than on a life of another basis, they would have had to include the settlor as a potential beneficiary, as they want the option for their cover to be assigned back to them, so it can continue into retirement. This means that they might be subject to POAT on the retained benefit. 20

21 Partnership or shareholder cover the questions you need to ask your clients Do the partners or shareholders ( lives ) have any cover? Does it cover the full value of everyone s share of the business? For each life: Do they want to add: Life and/or critical illness cover? Total permanent disability benefit? Premium protection benefit (waiver)? Cover reinstatement option? Does the business need loan or key person cover? Are the policies to be written in trust? Are more than three lives to be covered? Is the cover to end at their normal retirement date? Consider using Protect fixed or rolling term cover. Write each policy on an own life basis, with the life to be covered as both the life assured and the policyholder, written in trust for the other partners or shareholders. Write each policy on a life of another basis, with the life to be covered as the life assured, and the other life/ lives as the policyholder(s). For more information see our leaflet Effective business protection without a trust. Consider using Protect rolling term cover. Do they wish to have the option to use the policy for personal cover after they retire? Choose the appropriate trust. For more information see our leaflet Partnership or shareholder cover trust selector. Complete the application, trust documents and option agreements as needed. Include the settlor as a potential beneficiary of the trust. Exclude the settlor as a potential beneficiary of the trust if they want to avoid pre-owned asset tax. For more information see our leaflet Effective business protection without a trust. If you are applying by paper you can cover two partners or shareholders on each application form, using two of the policies in the plan. If more than two lives are to be covered and the clients want to write all the policies in one plan, use our form Applying for additional Protect policies and fix them firmly together. 21

22 Support from Old Mutual Wealth Benefit Term Premium Fixed term Life only Critical illness (with or without life cover) Life: 5 to 50 years Critical illness: 5 to 40 years Guaranteed Rolling term Life only Critical illness (with or without life cover) Guaranteed whole life Life only 10 year renewable Whole of life Guaranteed for 10 year periods Guaranteed The cover Protect offers life and critical illness cover with a number of different terms available, as shown in the table above. Depending on which type of term you choose and the age of the life assured, we can offer life cover up to 10 million for business protection policies. Flexibility Flexibility is built into our protection plans, because we know how important it is for the cover to be able to match clients needs in the long term, as well as at outset. Our unique inflation option is automatically included and is available every year with no age limit and no matter how many times it is declined. We also include guaranteed increase options which, depending on the type of term chosen, can cover an increase in a key person s value to the business, an increase in the company s loans, or an increase in the value of an individual s share in the business*. We do not ask for health evidence when any of our increase options are used, and every increase is made to the original policy. Additional benefits Depending on which type of term they choose, clients may be able to add total permanent disability benefit* or cover buy-back following a claim (our cover reinstatement option) for an extra premium. Waiver of premium benefit can be added to all our protection plans. You can find all the details of the benefits available with each type of policy in the Protect adviser guide About Protect. * not available for guaranteed whole life. 22

23 Support material A wide range of support material is available to help you advise your clients on business protection. We have referred to many of these items in this leaflet. We also offer leaflets suitable for you to give to your clients, reinforcing what you have explained to them about the different types of business protection cover. Access all the support material at www. oldmutualwealth.co.uk/fasite/ business_assurance Help is available when you need it Whenever you have a question about what our products can cover, how business protection should be set up, or you have a complex tax or trust question, you can call our helpline on Because the people covered by business protection tend to be older than the average protection client, you may find that many of them have a less than perfect medical history. Rather than quoting them a standard premium, if you think they might be rated for any reason you can call our underwriting helpline for a definitive answer on their acceptability for cover, and whether we would rate their premiums on

24 The above examples cover the main aspects of business assurance. As you may expect, each business is unique and the above solutions may or may not be suitable in individual cases. This document is based on Old Mutual Wealth s interpretation of the law and HM Revenue & Customs practice as at April We believe this interpretation is correct, but cannot guarantee it. Tax relief may change. Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Old Mutual Wealth Life Assurance Limited is registered in England & Wales under number Registered Office at Old Mutual House, Portland Terrace, Southampton SO14 7EJ, United Kingdom. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services register number VAT number When printed by Old Mutual this item is produced on a mixed grade material, which uses a combination of recycled wood or paper fibre from controlled sources and virgin fibre sourced from well managed, sustainable forests. SK5786/ R/June 2014