Protecting the people behind your business.

What Is Key Person Protection?

Key Person Cover provides a financial safety net if a crucial employee, partner, or business owner dies or becomes critically ill. It’s designed to:

• Offset loss of revenue or profits
• Cover recruitment and training of replacements
• Protect relationships with lenders, suppliers, and customers

It’s available to:

• Partnerships & LLPs
• Sole traders
• Shareholders
• Senior employees and operational leaders

Who Counts as a Key Person?

A key person is anyone whose knowledge, skills, or leadership are central to business success. This may include:

• Managing directors and founders
• Lead engineers, developers, or specialists
• Senior sales or relationship managers
• Partners or members in professional firms

Even team members without a financial stake may qualify if their absence would impact profitability, project delivery, or business reputation.

Ask yourself:

• Could we replace their expertise easily?
• Would their absence disrupt current contracts or expansion plans?
• Could we lose clients or supplier confidence?
• Are business loans or overdrafts dependent on this person?

Bring the bigger picture

Be ready to discuss the business structure, key roles, ownership and any existing protection. Your adviser can explain what further information is needed.

Key person cover and shareholder protection have different purposes. Each needs to be considered in context.

Tax-Efficient Life Cover for Directors and Employees

A Relevant Life Plan is an individual life insurance policy paid for by a business on behalf of a director or employee. It provides valuable financial protection for your loved ones by paying a lump sum if the insured person dies during the policy term.

Unlike traditional group life insurance arrangements, Relevant Life Plans are designed specifically for businesses that want to provide death-in-service style benefits for key employees or company directors. They are often a practical solution for small businesses that may not have enough employees to support a group scheme.

Who Is Relevant Life Cover Suitable For?

Relevant Life Cover may be suitable if:

• You run a small business and want to provide life cover for yourself or your employees.
• You are a company director looking for a potentially tax-efficient way to arrange life insurance through your business.
• You want to provide valuable employee benefits without the need for a larger group life insurance scheme.
• You are looking for a solution that is separate from your personal insurance arrangements.

How Does It Work?

The policy is arranged by the employer and is normally written in trust for the benefit of the employee's chosen beneficiaries.

If the insured person dies during the policy term, a lump sum may be paid to their beneficiaries. Many policies may also include a terminal illness benefit, subject to the policy terms and conditions.

Potential Benefits

Relevant Life Plans can offer a number of advantages, subject to individual circumstances, HMRC practice and current legislation:

• Employer premiums may qualify as an allowable business expense for corporation tax purposes.
• Premiums are not normally treated as a benefit-in-kind for the employee.
• Benefits are typically paid through a trust, helping funds reach beneficiaries efficiently.
• Cover can often continue if employment circumstances change, although options will vary between providers and individual arrangements.

Important Information

The tax treatment of Relevant Life Plans depends on individual circumstances and may change in the future. Tax benefits are not guaranteed. Eligibility, policy features and portability will depend on the insurer's terms and conditions.

If you're a company director or business owner and would like to explore whether Relevant Life Cover is suitable for you, we can help you understand the options available and the potential benefits for your specific circumstances.

A personal and business conversation

We help you understand how this differs from personal life insurance and what should be considered. Tax treatment is not guaranteed and should be confirmed for your circumstances.

Your family may depend on your income from the business. Your company may depend on you. Looking at both sides can help you identify questions that a standalone policy discussion might miss.

Start with your business, not a product

We offer fee-free advice and a consistent point of contact for business owners in Edinburgh and across the UK.

Be ready to discuss the business structure, key roles, ownership and any existing protection. Your adviser can explain what further information is needed. There is no need to send financial records or sensitive employee information in an initial message.

Different cover, different purposes

Key person protection addresses the financial impact of losing an important person. Shareholder protection concerns ownership and the possible purchase of a shareholder's interest. Each needs to be considered in context.

We can consider personal protection alongside business protection while explaining their different purposes.

Why It Matters

Without clear planning, shares could pass to unintended recipients - or even fall outside the business entirely. This could lead to:

• Disputes among surviving shareholders
• Delays in decision-making
• External influence on the company’s direction

With shareholder protection in place, remaining owners have first refusal on shares, often funded via a tax-efficient life insurance policy.

“It’s not just about protecting shares - it’s about protecting your business relationships, leadership, and legacy.”

How Shareholder Protection Works

At Dunedin Financial, we help you tailor protection around your structure. Plans are often structured using:

• Cross-option agreements
• Share purchase insurance
• Business trust arrangements

The goal? To ensure clarity, cash, and control in the event of a shareholder’s death or critical illness.

The insurance and the ownership arrangements need to be considered together. Legal agreements and tax treatment require appropriate advice for the business's circumstances.

Consider your wider responsibilities

Your family may depend on your income from the business. Your company may depend on you. Looking at both sides can help you identify questions that a standalone policy discussion might miss.

Explore key person cover and personal protection as part of the wider conversation.