Business protection insurance in the UK is a group of policies that pay a business, its owners or an employee's family when someone the business depends on dies, is diagnosed with a critical illness or cannot work. The main types are key person cover, shareholder or partnership protection, business loan protection, relevant life insurance and executive income protection, and the right one depends on what the business would struggle to pay for.

Unsure which of them your company or partnership needs? Leave your details in the form below and an adviser at an FCA-regulated brokerage will ring to talk it over, at no charge.

How does a business decide which protection it needs?

Start with the loss, not the product. Royal London's adviser guidance (8 September 2025) says "Business protection insurance helps safeguard a business against the financial impact of a key person’s death or critical illness", and two of the questions it suggests asking are "Would the business have enough funds to survive until a replacement is found?" and "Would the remaining partners have enough funds to buy out the deceased’s partner’s share from their estate?"

"The arrangement and type of plan depend on the business structure and its specific needs", so a limited company, a partnership and a sole trader can end up with different set-ups for the same worry. A rough way to match the worry to the cover:

The worryThe cover usually in questionWho the money goes to
Losing the profit or skills of one personKey person insuranceThe business, or trustees for the other owners
An owner's share passing to their familyShareholder or partnership protectionThe surviving owners, usually through a trust
A loan or overdraft that must still be repaidBusiness loan protectionThe business, or its trustees
Death cover for a director or employee, paid for by the companyRelevant life insuranceThe person's family, through a trust
A named employee's pay if they are too ill to workExecutive income protectionThe business

That table is a starting point, not a recommendation. One business may need two or three of these and another only one. Ownership of a policy and where the payout goes are set at the start, so they are worth deciding before you apply, not after. Other guides to workplace cover are collected in business and workplace cover.

What does key person insurance cover?

Key person insurance is the business insuring someone whose absence would cost it money: a director who brings in most of the sales, say, or the one engineer who knows the systems. In the set-up Royal London calls "life of another", the company owns a policy on that person's life and the money is paid to the company, which can use it while it reorganises or recruits.

Legal & General's business protection page says its Key Person Protection can respond to death or terminal illness, with a specified critical illness available only if chosen at the start for an extra cost, and only "while the plan is in place". The detail of who owns the policy, how the amount is worked out and what it costs sits on what key person insurance is for and how much it costs.

What is shareholder or partnership protection?

This one is about the owners rather than the business's income. If an owner dies or becomes critically ill, their share does not vanish; it passes to their family or their own decision about selling. Royal London's guidance describes one common set-up: "Under an individual purchase arrangement, each business owner takes out a protection plan on their own life for the value of their share of the business." In that arrangement the plans are written in trust for the other owners, who receive the money and use it to buy the share.

Legal & General describes its own Share Protection as a way to buy out a partner's or director's shares after death or terminal or critical illness, but only "if a valid claim is made during the length of the policy". The policy has to be in force and the claim has to be valid.

Partnership law changes the structure. In England, Wales and Northern Ireland a partnership is not a separate legal entity, so it cannot hold a policy on an employee's life the way a company can and one of the partners takes it out in trust instead; a Scottish partnership is a separate entity and can. How this differs from key person cover is in key person insurance and shareholder protection compared, the basics are in what shareholder protection insurance is, and pricing is in shareholder protection insurance cost.

Co-owners wondering how a buy-out could be funded in their own firm can use the short form alongside this guide; the FCA-authorised broker who rings back can set out how insurers would approach a share purchase plan for their business, without charge.

How does business loan protection work?

Business loan protection is aimed at debt. Legal & General says its version can help a business repay "an outstanding overdraft, loan or commercial mortgage" if a key employee dies or is diagnosed with a terminal illness (life expectancy of less than 12 months) during the length of the policy. Critical illness is an extra, and only if chosen when the policy starts.

The amount follows the borrowing: "your cover should reflect the amount your business owes in borrowed money", and the policy "can be taken out on a 'level' or 'decreasing' cover basis". Level cover keeps the same sum insured for the whole term; decreasing cover reduces over it.

The tax treatment differs from key person cover. "Life policies used to protect business loans are not usually regarded as business income, because the money borrowed will be paid back rather than money that has been earned by the business", the same page explains; it adds that the premiums would not receive tax relief, because the policy protects the capital of the business. Royal London's adviser guidance takes the same line on loan protection premiums. The full explanation is on business loan protection insurance.

What is relevant life insurance for a company?

Relevant life insurance is different in kind from the covers above: it protects a person's family, not the business. Legal & General describes it as "a cost-effective way for an employer to arrange term assurance on the life of an employee, including directors", and pitches it at companies too small to set up a full group protection scheme. Its plan has to be written in a trust, so the money goes to the employee's family or dependants rather than to the company.

It needs an employment relationship: the plans "are not available where there is no employer/employee relationship", which rules out sole traders and equity partners. HMRC's Employment Income Manual (EIM15045, 28 July 2020) lists 3 types of policy that qualify as relevant life policies for tax purposes.

If you are weighing it against key person cover, key person and relevant life compared sets out the difference, what relevant life insurance is explains the policy, and relevant life insurance providers looks at who offers it.

What is executive income protection?

Executive income protection is the sickness side of the picture. Legal & General says it pays a monthly benefit to the business while a named employee cannot work through illness or injury. The company takes it out on a named employee or director, rather than the person buying it for themselves, and the money can go towards that person's sick pay.

That makes it a sibling of key person insurance but not a replacement for it: one replaces an individual's pay while they are off sick, the other compensates the business for lost profit. How it works, what it is based on and how it is taxed is covered in how executive income protection works, with a side-by-side view in executive and personal income protection compared. Owners who run their own company can also read income protection for business owners.

Is business protection insurance tax deductible?

It depends on the type of cover and how it is set up. Royal London's guidance says "The tax implications of business protection insurance depend on the type of arrangement." For key person cover, it says relief on premiums is unlikely where the life assured is a significant owner of the business. HMRC's Business Income Manual (BIM45525, 1 April 2016) allows key person premiums only if all its conditions are met: in short, the sole purpose must be to meet a loss of trading income from losing the person's services, not a capital loss, and a life policy must be term insurance with no other benefits. The manual adds that the term should not run beyond the employee's usefulness to the company.

That is the general position, not tax advice; the rules can change and an accountant can check how they apply to a particular company. The deductions question for key person cover has its own page: is key person insurance tax deductible. Trusts, which sit behind several of these set-ups, are explained in our guide to life insurance trusts.

Frequently asked questions

What is business protection insurance?

It is cover that pays out when a person a business depends on dies, is critically ill or, with some policies, cannot work. Depending on the policy, the money goes to the business, to the surviving owners or to the person's family.

What are the types of business protection insurance?

The main types are key person insurance, shareholder or partnership protection, business loan protection, relevant life insurance and executive income protection. Each is summarised above, with a link to its own guide.

How is business life insurance different from personal life insurance?

Personal life insurance is usually bought by a person for their own family. Business cover is taken out for a business purpose, such as paying a loan, funding a share purchase or replacing profit, so the owner of the policy and the person who receives the money are often different.

Can a sole trader get business protection insurance?

Royal London's guidance says cover is available for partnerships, shareholders, sole traders and key employees, although relevant life plans need an employer and employee. Which arrangement suits a sole trader is something the broker can talk through on the free call-back.

How much does business protection insurance cost?

The price depends on the type of cover, the amount, the length of the policy and the age and health of the person covered. Each product's cost page gives more, for example key person insurance; a broker can price the combination you need.

For anyone who wants a second pair of eyes on which cover fits, the enquiry form arranges a no-cost phone conversation with a broker, who can look at your business's own situation.

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