Share protection is a policy that helps with the cost of shares if a shareholder in your private limited company, member of your Limited Liability Partnership (LLP) or partner in your partnership were to die.
How does share protection work?
This insurance product is most commonly taken out by each shareholder or business owner as an additional part of their Life Insurance and/or Critical Illness policy written in trust for the other business owners. Shareholders also enter into a cross-option agreement and premiums are paid for the business.
What is share protection?
If a business shareholder dies, or is diagnosed with a terminal illness or a critical illness, this insurance product pays out a sum to the remaining business shareholders to help buy the deceased or critically ill business owner’s share of the business.
What triggers a payout?
During the policy term, if one of the agreeing shareholders dies, is diagnosed with a terminal illness (and life expectancy is less than 12 months) or suffers from a specified critical illness agreed in the policy, the other shareholders will receive a sum of money that can help buy that business owner’s share of the business.
What are the details?
- Minimum cover: No minimum amount of cover. Driven by minimum premium.
- Maximum cover: No maximum sum assured for life cover only, but subject to underwriting. If Critical Illness Cover or Critical Illness Extra is chosen, the maximum cover per person will be £3 million if the Specific Work Task definition under TPD applies, or £2 million if the Own Occupation definition under TPD applies. For the Whole of Life Protection Plan the maximum amount of cover is:
- £5 million up to 69 years
- £2 million 70-79 years old
- £1 million 80-84 years old
- £1 million if indexation is selected
- Type of cover: Level and Increasing Life Insurance cover are available. The Whole of Life cover is also available.
- Minimum term: 1 year without Terminal Illness Cover. 2 years if bought with Critical Illness Cover or Critical Illness Extra. There is no minimum term with the Whole of Life Protection Plan.
- Maximum term: 50 years. There is no maximum term with the Whole of Life Protection Plan.
- Minimum age: 18. The minimum age at the end of the policy is 29.
- Maximum age: 77 for Life Insurance. 67 if bought with Critical Illness Cover or Critical Illness Extra. 84 for the Whole of Life Protection Plan. Life Insurance and Increasing Life Insurance must end by the client’s 90th birthday, or their 75th birthday if bought with Critical Illness Cover or Critical Illness Extra.
- Premiums: Guaranteed. Choice of guaranteed or reviewable if Critical Illness Cover or Critical Illness Extra is chosen at outset.
- Trusts: Policies can be placed in Trust.
- Death in the first year: If the life insured dies within the first year of holding the policy, as a result of suicide or intentional and serious self-injury or an event where, in our reasonable opinion, the life insured took their own life, the policy will be cancelled.
What are the benefits and options?
Accidental Death Benefit:
Changing Your Policy (Also known as Guaranteed Insurability Option):
Can increase cover on certain specified events, without need for further medical evidence. Eligibility criteria and restrictions apply.
Your client can request to make other changes to their plan. A new policy may need to be set up.
Critical Illness Cover:
Critical Illness Cover or Critical Illness Extra can be added for an additional cost at outset with Life Insurance cover.
On request. Subject to eligibility.
Increasing Life Insurance is available.
Available with Whole of Life Protection Plan.
Wellbeing Support – Provided by RedArc Assured Limited:
Automatically included. Not available on Whole of Life Protection Plan.
Terminal Illness Cover:
Automatically if life expectancy is less than 12 months unless term is less than 2 years.
Waiver of Premium:
Can be included for an additional cost.