11 Purdeys Way, Rochford, England, SS4 1ND

info@mykeymaninsurance.com

020 711 288 44

MyKeyManInsurance Logo
Call Us Today
Request Quote
Business Protection Expert

Partnership Protection Insurance

Request A Quote Today

Protect Each Other – Your Business – Your Income

Business Protection Experts

Independent UK Broker

Trusted by UK Directors Since 2008

Rated 4.9/5.0
Row of four headshot portraits showing diverse adults, each facing forward and smiling against a transparent background
104+ Reviews

Providers We Use

Zurich logo
AVIVA Logo
HSBC Logo
Liverpool Victoria Logo
Royal London Logo
Scottish Widows logo
Vitality Logo

What Is Partnership Protection Insurance

Helping you secure your business in the event of death or illness of
a business partner.

Partnership protection insurance is a form of life insurance set up to help business partnerships keep control of the company they have built in the event of a partner’s death or serious illness. As well as protecting the business, it also protects the interests of the deceased’s family and ensures that they are fairly treated and their needs are met under these difficult circumstances.

The cover your business requires will depend on how your business is set up. If you run a limited company then you would be looking for Shareholder Protection Insurance. This is where life insurance is taken out on the life of the company’s shareholders. If, however, your company is a Limited Liability Partnership (LLP) life insurance is taken out on the lives of business partners.

As well as life insurance, both kinds of policy can also include critical illness cover, which protects your organisation’s interests if a partner is no longer able to carry out their duties as a result of a critical illness diagnosis such as cancer, heart attack or stroke.

Your partnership is an intrinsic part of your business success and like everything that is beneficial and profitable to your business, it needs to be protected. Partnership Protection Insurance allows you to protect your business by protecting the people who have helped it go from strength to strength. But what is Partnership Protection Insurance? How does it work? And why is it such an essential component in protecting your enterprise? Read on, and we’ll answer all of these questions and more.

LLP vs Traditional Partnership: What’s the Difference for Protection?

The type of partnership you run changes who technically owns the policy and how it needs to be structured. In a traditional partnership, the business itself can’t hold assets or insurance policies in its own name, so individual owners hold their own policies, written into trust for the benefit of the others.

In a Limited Liability Partnership (LLP), the LLP is a separate legal entity, much like a limited company, so it’s able to own the policy directly and pay the premiums itself, rather than relying on individual partners to arrange trust-based protection. This tends to simplify administration, particularly once a partnership grows beyond two or three people, though the tax treatment for each route can differ.

You should seek independent tax and legal advice before choosing a structure, as the most appropriate route will depend on your specific partnership arrangements.

Why do I need Partnership Protection Insurance?

This includes you and your business partner/s. No matter how operationally strong your business may be now, do not underestimate the part you and your partners play as the driving force behind what makes your business stand head and shoulders above your competitors.

Even if you and your partners are in good health, it is worth considering what would happen to the business if circumstances changed unexpectedly. Partnership protection is designed to give you a practical route to manage that situation if it arises.

If a partner dies or becomes critically ill, the right protection can provide funds to help the others buy out their share of the business, either directly from them or their estate.

Not only does this allow you to continue steering the ship in the right direction, it ensures that critically ill partners have a financial safety net upon which they can fall back while they convalesce. By that same token, it also helps to give grieving families the financial recourse to move forward without having to worry about managing their finances alongside managing their grief.

Request A Quote Today

How does it work?

In a standard partnership protection insurance arrangement, partners each take out their own life and critical illness policy, or life cover alone. This is then written into a trust for the benefit of the other partner or partners. Your legal team should be able to help you draft a trust document that will provide the right protection for your business’ circumstances.

If there are only two partners, each can instead set up a personal business partner life insurance policy, sometimes called a life of another policy. In this instance, the individual partners pay the premiums and these can be adjusted to reflect the extent of each partner’s share in the business.

If you opt for critical illness protection, your policy will usually pay out a lump sum if a shareholder or partner is diagnosed with a specific illness or sustains an injury that is covered by the policy, and survives for a minimum of 14 days.

How Much Does Partnership Protection Insurance Cost?

Partnership protection insurance cost depends mainly on the number of partners being covered, their age and health, and how much protection each one needs to buy out their share. A young, healthy partnership of two with modest protection in place will usually pay less than a larger partnership covering older partners for higher sums.

Adding critical illness protection alongside the life insurance increases the premium, since the insurer is covering a wider range of claims. Business partnership protection insurance is generally easier and more straightforward to arrange when everyone involved is in good health, which is worth bearing in mind when planning ahead.

Most partnerships base the level of protection on each partner’s share of the business value, since that’s broadly what the survivors would need to raise to buy out a deceased partner’s stake. As a starting point, many use each person’s percentage share of the business, adjusted for any outstanding loans or liabilities.

We recommend speaking to a qualified financial adviser or solicitor to confirm the right level of protection for your specific circumstances. This information is provided for general guidance only and does not constitute financial, legal or tax advice.

It’s worth revisiting your protection periodically rather than setting it once and forgetting about it, since a growing business usually means the buyout cost rises too.

If your business is a limited company rather than a partnership, Shareholder Protection is the equivalent cover to look at. Those who also want to protect a company loan can pair this with Business Loan Protection, and those wanting cover for a single key individual rather than the whole partnership should compare this against Key Man Insurance Taxation and Director Life Insurance.

How it works

3 Simple Steps.

Submit

Submit the details of the key member of staff

Compare

Compare the quotes

Apply

Submit application to underwriting.

Rated 4.9/5.0

Row of four headshot portraits showing diverse adults, each facing forward and smiling against a transparent background

104+ Reviews

Super hero key person

Business Protection Experts

  • MyKeyManInsurance.com was Established in 2008.
  • You deal directly with us we do not pass on your details to any third parties.
  • Free trust set up.
  • 4.9 Star Trust Pilot reviews, our customers love us!
Request A Quote Today

Our Customers Love Us!

What people are saying about us.

Rated 4.9 Out Of 5 Stars

Excellent service with easy to understand explanations

Jody was very helpful in explaining the options and I thoroughly recommend his company

We received a wonderful service from My Key Man

We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the most suitable we found too.

A great firm that answers questions fast

I had a great time working with My Key Man Insurance when I applied for the different insurances they offer. They were able to answer all of my questions quickly and effectively. I will recommend them to my friends and family.

Excellent service with easy to understand explanations

Jody was very helpful in explaining the options and I thoroughly recommend his company

First Class Service

The standard of service was first class. They kept me up to date with progress on my Relevant Life Policy, followed up promptly following delays caused by my medical practice being slow in compiling reports, and responded instantly and clearly to any questions I had.

We received a wonderful service from My Key Man

We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the most suitable we found too.

Excellent service with easy to understand explanations

Jody was very helpful in explaining the options and I thoroughly recommend his company

Further Reading

Key Man Insurance Taxation Image
UK Taxation Guide (Updated 2024)

Key man insurance taxation rules have changed in 2024, affecting how businesses manage this important coverage. Here’s what you need to know about the latest updates.

Read More
Why Key Person Insurance
5 Reasons Your Company Needs Key Person Insurance

Key man insurance is crucial for protecting your business from the unexpected loss of key personnel. Here are 5 reasons why every company should consider this essential cover.

Read More
Calculator
Key Man Insurance Calculator

Wondering how much cover your business needs? Our calculator makes it easy to find the right coverage for your key employees.

Read More
Aviva-Key-Man-Insurance-Review
Aviva Relevant Life Insurance Review

Aviva Relevant Life Insurance Review Request A Quote Today speak to one of our advisors or fill in our form to When it comes to Relevant Life Insurance…

Read More

Partnership Protection Insurance FAQ

What are the advantages of partnership insurance?

Here are some key advantages of partnership insurance in the UK:

  • Covers all partners together under one policy at a shared cost. This can be more affordable than separate individual plans.
  • Allows higher combined coverage amounts than individually purchased policies.
  • Simplifies administration with a single shared policy for the partnership.
  • Proceeds can be used to buy out a deceased partner’s interest so the business can continue.
  • Premiums and benefit payouts are not taxed under most partnership policies.
  • Flexible structuring to insure all partners or just key partners.
  • Policy proceeds provide liquidity to settle partner affairs if they pass away.
  • Locks in the insurability of partners in case of future health changes.

By sharing coverage under one partnership policy, many small businesses find it is an efficient and affordable way to put protection in place.

That depends on how your business is set up. In the case of a standard partnership the individuals own the policies rather than the company. Although the partnership may have a name its own bank account, remember that businesses set up as partnerships cannot own property or insurance policies in their own name. In the case of a LLP, however, it’s different. Because an LLP is recognised as a legal entity, the business can own the policy rather than the individual partners.

If your business is an LLP, it will continue to operate following the death of a member, but profits are paid to the deceased’s estate. If the business is a traditional partnership but there is no Partnership Agreement in place, it will dissolve on the partner’s death. As such, the deceased partner’s estate and beneficiaries will be entitled to their share of the business.

Cover is usually based on each partner’s share of the business value, so the payout is enough for the survivors to buy out that share without taking on new debt. Many partnerships review this figure every year or two, since business value tends to change faster than people expect.

Standard policies are built around death, and critical illness if you’ve added that cover, not around someone simply retiring or resigning. If that happens, the exit is usually handled separately through the partnership agreement, and their cover would typically need to be reviewed or cancelled at that point.

Yes, most providers let you add critical illness cover alongside the core life insurance, so the policy also pays out if a partner is diagnosed with a specified serious illness. This increases the premium, since the insurer is covering a wider range of claims, but it protects the business against a partner being unable to work due to a serious illness, as well as against their death.