Smart Protection for Small Business Owners: What Insurance Options Are Available?

Running a small business isn’t just about today’s to-do list; it’s about protecting the future. For many owners, the business is not only their livelihood but also their family’s main source of income. Yet too often, protection is overlooked.

Here’s a simple breakdown of the most important insurance options available to small business owners, and how they can make a difference.

Business owners have insurance options available to protect them and the business.

Protecting the Business: Key Person Insurance

Every small business has people it simply can’t do without; whether that’s the founder, a top salesperson, or a specialist whose skills keep things running.

Key Person Insurance (sometimes called Key Man Insurance) provides a pay-out if a key employee or owner passes away or is diagnosed with a critical illness. The money goes to the business, helping cover things like:

• Recruiting and training a replacement

• Covering lost profits during a transition period

• Paying off business loans or protecting credit lines

• Reassuring investors, staff, and customers that the business can continue

  
  

🔑 Benefit: Keeps the business stable during a crisis and shows you’ve planned responsibly for the unexpected.

Protecting People Through the Business: Relevant Life Cover

While most people think life insurance is only a personal purchase, business owners can often take it out through their company. Relevant Life Cover is a tax-efficient way for directors or employees to have life insurance paid by the business.

Here’s how it works:

• The policy is paid for by the business, not the individual.

• Premiums are usually treated as a business expense (so they can be tax-deductible).

• The cover pays out to the individual’s family, not the company, via a trust.

• No benefit-in-kind tax for the employee.

  
  

💡 Benefit: The family gets personal protection, the business gets corporation tax relief, and it usually costs less than buying a policy personally.

Income Protection for Owners

If you’re self-employed or running your own company, there’s no sick pay safety net. An Income Protection policy can replace a large chunk of your income if illness or injury stops you from working.

This means you can still:

• Pay yourself a salary or dividends

• Cover household bills and living costs

• Keep the business running without rushing back too soon

  
  

💡 Benefit: Provides personal financial stability, which in turn protects the business from collapsing under personal pressure.

he Bigger Picture

A smart protection plan for small business owners often combines business-focused cover (like Key Person) with personal protection through the business (Relevant Life, Income Protection).

Together, they provide:

• Financial resilience for the company — ensuring the doors stay open if something happens to a key figure.

• Security for family and dependents — life cover and income protection that doesn’t rely on personal budgets alone.

• Tax efficiency — especially when using Relevant Life Cover through the business.

Next Step: If you’re a small business owner and aren’t sure what cover is right for you, the best move is a short review. It usually takes less than 10 minutes to work out what’s available and how much it might cost; often less than you’d expect.