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How much Business Protection should you get
7 December 2020
Business Protection. You need it more than ever
Prior to lockdown, over half (51%) of businesses had some form of debt, owing an average of £176,000 each – and yet just 20% used an insurance policy as security.
To add to this already significant issue, bank lending to struggling businesses via government-backed COVID-19 loan schemes reached nearly £52bn as of mid-August – meaning that UK businesses are more heavily indebted than ever.
Business loan protection
Business loan protection provides funds to repay a business loan, commercial mortgage, or a director’s loan if one of the company’s owners were to die or be diagnosed with a serious or terminal illness. Essentially, this type of insurance comprises a life cover or critical illness policy taken out on the life of the business owner or key person, with the payout ensuring the business can pay its debts should the worst happen.
Most lenders require some form of security when lending to businesses; often, business owners will use their own personal wealth (e.g. their property) as security. So, in addition to their business suffering if they were to unexpectedly die or become seriously ill, their family could face serious financial hardship or even lose their home.
Director’s loans
It is common for businesses to have a director’s loan account, through which the director can:
— Lend money to the business to fund initial start-up costs or see it through cash flow pinch
— Borrow money from the company that is not classed as salary, dividends or expense repayments.
According to research from Legal & General, the average director’s loan totals £169,000 – and yet well over a quarter (28%) of businesses are unaware that director’s loans must be repaid upon death. This means the business could collapse if there is no insurance policy in place as
Loss of a key person
A staggering 52% of businesses say they would cease trading within a year if they lost a key person. Losing a key member of staff can have a huge impact on the business in terms of lost profits, poor cashflow and, potentially, a change in its creditors’ attitudes to outstanding debts. That’s where business loan protection comes in – it can help alleviate financial pressure by paying off the company’s debts and enabling the business to get back on track.
As with all insurance policies, conditions and exclusions will apply
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Contrary to costs such as legal fees, estate agency fees or Stamp Duty, having your new home surveyed isn’t actually compulsory. However, with a property being the most expensive thing most of us will ever buy, the price of not having it checked by a surveyor could be devastating. If you buy a property for the seller’s asking price and later find it has serious defects, it’s too late to back out of the purchase or renegotiate a price with your seller. You’re also likely to find yourself paying out to rectify the fault – and probably a lot more than you would have paid for a survey in the first place! A survey to suit your needs There isn’t just one type of survey available – you can get different ones that range in cost, according to the kind of property you’re buying: Condition report What is it: a basic overview of the property that only highlights the most significant defects; it doesn’t go into detail. Suitable for: those buying a relatively new homes in good condition. Homebuyer report What is it: a more comprehensive survey that highlights obvious defects such as damp or subsidence. It will include advice on any necessary repairs or maintenance and may also include a valuation or an estimation of rebuild costs. However, it’s not an intrusive survey, meaning the surveyor will only be picking up on visible issues. Suitable for: those buying a standard property in a reasonable condition. Building survey What is it: the most comprehensive type of survey, which looks at the property’s structure and condition, lists any defects and advises on repair and maintenance work. Unlike a homebuyer report, this is a much more hands-on survey, so the surveyor will do things like going up in the loft or looking under floorboards or behind sofas. Suitable for: older or listed buildings, or properties that are in poor condition or have an unusual design or structure. But what if I’m buying a new build? Even though it’s tempting not to have a new build property surveyed, there can still be issues with new build homes that could be costly to repair. If you’re buying a new build, you’ll need a slightly different survey called a snagging survey. It identifies any defects with new build homes, from cosmetic issues to structural problems, which the developer will then have to fix within the two-year warranty period. We can help As a member of Openwork, we can refer you to our specialist Surveying Service, which offers access to a large network of approved surveyors across the UK. For your peace of mind, get in touch. Surveying is not regulated by the Financial Conduct Authority.
Get to know your SVR
When you get a mortgage the lenders will want to do some checks to confirm you have the income to pay the new mortgage and they will ask for documents from you. We work out from the documents you give us which lenders will lend you the new mortgage. We understand what lenders are looking for so we can put you in the best position. Get in touch and we will be happy to help.
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We understand that from time to time our clients may find themselves dealing with circumstances that could mean they are potentially vulnerable. For example, a change in health, caring for a family member, or coping with the loss of a loved one. There are many different types of vulnerability, and what makes one person vulnerable might not affect someone else. When we are vulnerable, our need for financial advice may change. However, admitting vulnerability or seeking help can sometimes feel hard.
If this is something you would like to discuss with us, please ask for a copy of our support guide or download a copy here. This guide is designed to help explain vulnerability and the ways in which we might be able to support you. If you feel any of the circumstances in the brochure apply to you, please talk to us
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