Ltd director insurances against sickness advice

[Lukejohn]

Hi all, wondering if anyone can give me some advice. I am a sole director in a Busienss , with my wife on the payroll for a small amount. I pay the usual small amount of salary and the rest in dividends. (Advised by accountant). I’m wondering what insurances I have on offer to protect me against income and sickness in this circumstance? What are others doing? In a job of course you get 6 - 12 months full sickness. If I was ill the business turnover would go significantly down (business relys on me too
Much) and I wouldn’t receive sick pay. What are my options? Thanks

 

[Socio South West]

@Lukejohn Having been through this exercise before from a similar position, first advice is to step back and work out what you need to be covered for, and how long you can manage from reserves before you need to supplement income. Certainly the longer before you need to claim, the better rates you will get.

I discovered that there are a lot of Critical Illness cover products out there, but the small print on most makes them pretty restrictive for what you are actually covered for, and there are a lot of tales of Insurers wriggling and kicking to avoid paying out so if that's the route you end up going, choose carefully.

Do you already have Business Interruption on your Business Policy? Check what that covers you for.

For the record, in the end I worked out what I would need for 12 months incapacitation and built up that reserve in three interest bearing accounts with varying access. Kept my money in house, and all being well will become a nice golden handshake when I get my bus pass.

 

[WaveJumper]

One perhaps our forum member @Frank the Insurance guy

 

[Lukejohn]

Interesting outcome @Socio South West . I actually come to a similar conclusion with private health insurance recently. I looked into bupa and less benefited beneden. Realised I’d be paying a lot on premiums and decided to put that in saving instead each month for a pay as you go private healthcare system where the nhs fails. I’m assuming the same principle can be applied here? Just want to make sure I’m not missing out on anything. And wondering what others have got.

Importantly though you have pointed out business interruption. I don’t think I have that - I only have indemnity, employer and public insurances. So perhaps I should look at business interruption? Any others you have considered? Best LJ

 

[Mark T Jones]

Second @Frank the Insurance guy

I've recently investigating this fir my wife. Her job is reasonably physical and involves her turning up to multiple appointments each day.

Ultimately the terms and prices on income replacement were far too restrictive (she's not a member on here so I'll say she's not all that young)

We are now focusing on medical insurance, so that if she gets an injury or condition which is non-urgent (in NHS terms) but incapacitates her for work, she can get treated quickly.

So, it really does depend on individual needs and circumstances

 

[Lukejohn]

How about income protection? And critical illness. I’ve checked out Busienss interruption and it cover against fire floods rather than illness. Also income protection can be paid by the Business for tax relief ot by individual (losing tax benefits) - what’s the best approach if I was to take something out ?

 

[DEBS Ltd]

@Lukejohn Having been through this exercise before from a similar position, first advice is to step back and work out what you need to be covered for, and how long you can manage from reserves before you need to supplement income. Certainly the longer before you need to claim, the better rates you will get.

I discovered that there are a lot of Critical Illness cover products out there, but the small print on most makes them pretty restrictive for what you are actually covered for, and there are a lot of tales of Insurers wriggling and kicking to avoid paying out so if that's the route you end up going, choose carefully.

Do you already have Business Interruption on your Business Policy? Check what that covers you for.

For the record, in the end I worked out what I would need for 12 months incapacitation and built up that reserve in three interest bearing accounts with varying access. Kept my money in house, and all being well will become a nice golden handshake when I get my bus pass.

Business Interruption is only for consequential loss to the business for things like buildings, contents, stock and such like.

It would not provide any cover whatsoever in the event of sickness of a director.

Two things to have a look at here.

For your own income there is critical illness, as has been mentioned already. Given your circumstances, I wouldn't expect this to be cheap and they can be restrictive, as mentioned.

For the business itself, you're looking for Key man cover. It's in the realm of financial services, not general insurance. It would provide cover for someone to come in if you were ill and keep the business running. That someone would obviously depend on the nature of what you do.

 

[AndreasC]

If you go for a policy then relevant life policies that pay out in case of incapacity can be paid by your company but the payout go to you and there is no tax benefit on you and the company can claim tax relief on the premiums. Your insurer or FA will have to advise whether it qualifies for this. Us accountants don't write the policies

 

[Frank the Insurance guy]

One perhaps our forum member @Frank the Insurance guy

Thanks

Second @Frank the Insurance guy

Thanks

Business Interruption is only for consequential loss to the business for things like buildings, contents, stock and such like.

It would not provide any cover whatsoever in the event of sickness of a director.

Two things to have a look at here.

For your own income there is critical illness, as has been mentioned already. Given your circumstances, I wouldn't expect this to be cheap and they can be restrictive, as mentioned.

For the business itself, you're looking for Key man cover. It's in the realm of financial services, not general insurance. It would provide cover for someone to come in if you were ill and keep the business running. That someone would obviously depend on the nature of what you do.

@DEBS Ltd is spot on.

Best is to speak to a financial advisor - they will sit with you and provide bespoke advise on your particular circumstances, but main things are
1- Income protection/critical illness cover to provide you with some much needed financial help whilst you are unable to work
2 - Keyman insurance to pay for additional support to keep the business running until you are better


As an additional thought - what is your business? Are you aware of local "colleagues" in a similar situation where you can step in to help each other - you could speak to them to look at putting arrangements in place. I know some single firm architect client's who have other architect friends who they can call on to finish projects etc if they were away for a significant length of time.

 

[Lukejohn]

Thanks all - I’m running a business consultancy - could probably sell off work if needed but would be stuck for income. I do have reserves for a year if I was ill - wondering if others just rely on reserves. I don’t want to be irresponsible- appreciate I might never be ill. It’s just getting out of the head space having worked for 15 years for a company having sick pay and now over the last 10 years relying on my own income. I never thought about insurance for this until I was a little ill with covid recently and suddenly thought if it was more serious I’d be screwed. I’m starting to think that the reserves may be best to rely on - since it sounds quite a hassle with insurances not paying out and being expensive. I’d be interested to hear what others are doing?

 

[Newchodge]

(she's not a member on here so I'll say she's not all that young)

[shouting] Mrs Jones? MRS JONES? ARE YOU THERE?