Your business may be your biggest asset. What happens if the unexpected happens?
For many business owners, personal wealth and business wealth are closely connected.
Your company may provide your income, fund your lifestyle, support your family and form a significant part of your future retirement plans.
Protecting your wealth is therefore not only about pensions, investments and savings. It is also about protecting the business creating that wealth in the first place.
That is where effective business protection planning can play an important role.
Suggested read time: 4 minutes
What does business protection actually protect?
Business protection is designed to help reduce the financial impact of serious events involving the people on whom a company depends.
That could include the death or critical illness of:
a shareholder
a business partner
a director
a key employee whose knowledge, relationships or skills would be difficult to replace
The aim is not simply to buy insurance. It is to consider the financial consequences of losing a key person and put arrangements in place that could help the business respond.
At Folan Brookes, business protection is considered alongside wider financial planning because the two are often inseparable. A successful company may be one of its owner’s most valuable assets and an important part of their retirement strategy.
Shareholder protection: protecting ownership as well as value
Imagine two people each own 50% of a successful business.
They have spent years building the company, establishing a strong customer base and turning it into a valuable asset.
Then one shareholder dies unexpectedly.
Without appropriate arrangements in place, their shares may pass to their beneficiaries. That can create two very different needs at exactly the same time.
The surviving shareholder may want to retain control of the company. Meanwhile, the deceased shareholder’s family may understandably want to receive the financial value of the shares rather than become involved in running the business.
But where does the money come from?
Shareholder protection can provide funds that may allow the remaining shareholder to purchase the deceased shareholder’s shares, subject to the legal and protection arrangements in place.
This can help support continuity, reduce the risk of shares passing to an unintended third party and help the deceased shareholder’s beneficiaries receive value for their interest.
A simple “what if?” scenario
Illustrative example only. Actual business valuations, policy proceeds, tax treatment and the amount required to purchase a shareholder’s interest will depend on the circumstances and arrangements in place.
Consider a business owned equally by two shareholders and valued at £1 million.
Each shareholder’s stake is therefore worth approximately £500,000.
One shareholder dies unexpectedly.
Without shareholder protection
The deceased shareholder’s shares pass according to the legal arrangements in place.
The surviving owner wants to buy the shares but does not have £500,000 available personally. The company may not have sufficient cash either.
That could create several problems:
the surviving shareholder may need to borrow a substantial sum
the business’s cash reserves could come under pressure
investment or expansion plans may need to be postponed
the deceased shareholder’s family may struggle to realise the value of the shares
ownership and decision-making could become more complicated
the future value of the business itself could come under pressure
In other words, a business that appeared financially strong the day before could suddenly face a significant liquidity and ownership problem.
With appropriate shareholder protection
Suitable protection arrangements may provide funds to help the surviving shareholder purchase the deceased shareholder’s interest.
The deceased shareholder’s family may receive the value of the shares, while the surviving owner can retain control.
Crucially, the business has a better chance of continuing without having to find a large sum of money at one of the most difficult moments it is ever likely to face.
The precise outcome will depend on the policy, legal agreements and individual circumstances. That is why protection planning needs to be considered alongside shareholder agreements and succession planning.
Protecting the engine behind your personal wealth
There is another reason business protection matters.
For many owners, the business is effectively the engine powering their wider financial plan.
It may provide:
salary and dividends
pension contributions
money available for investments
financial support for the family
future proceeds from a sale
part or all of the owner’s retirement strategy
If the value or profitability of the business is affected by the loss of a key person, the consequences can extend well beyond the company’s bank account.
They can also affect the owner’s personal financial goals.
That is why joined-up planning matters.
The Folan Brookes approach considers business protection alongside personal pensions, investments, retirement planning and wider financial objectives, rather than treating each area in isolation.
What if the person you lose is not a shareholder?
Not everyone who is essential to a business owns part of it.
A company might depend heavily on a sales director, technical specialist, senior adviser or someone with particularly important client relationships.
If that person dies or suffers a specified critical illness, the financial consequences might include:
lost revenue
disrupted client relationships
recruitment costs
a temporary loss of expertise
reduced confidence among customers, suppliers or lenders
Key person protection is designed to provide the business with a financial payment following a covered event involving an insured key individual.
The proceeds could help the business manage lost profits, meet ongoing commitments, recruit a replacement or simply provide breathing space while it adapts.
Business partnerships can face a similar problem
Partnerships can also become financially vulnerable if one partner dies or becomes seriously ill.
The remaining partners may want to acquire the affected person’s interest but still need to find the funds to do so.
Partnership protection can provide money that may help the remaining partners purchase that interest, depending on the arrangements in place.
Again, the objective is straightforward: to give the business greater financial resilience at a time when uncertainty is already high.
Protection planning is really contingency planning
It can be tempting to think:
“We’ll sort that when the business is bigger.”
However, the more dependent a company becomes on particular people, the greater the potential financial impact when something goes wrong.
A useful starting point is to ask:
What would happen tomorrow if one of the people most important to the business were no longer there?
Would the company have enough cash?
Who would own the shares?
Could the remaining owners afford to buy them?
Would the family of the person who died receive fair value?
Could the business continue meeting its commitments while it adapted?
If the answers are unclear, there may be a gap worth reviewing.
Protect the business you have built and the future it is creating
You have probably spent years building value within your business.
Effective financial planning should consider how that value is protected, as well as how it might eventually be converted into personal financial security.
Business protection can form one pa
rt of that picture, alongside pension planning, investments, cashflow forecasting and planning for a future business sale or succession.
Folan Brookes can help you consider these areas together and build a financial plan around both your business and your personal goals.
Talk to Folan Brookes
If you would like to understand the potential financial impact of losing a shareholder, partner or other key person, speak to the Folan Brookes team.
We can help you identify the risks your business faces and consider appropriate protection alongside your wider personal financial plan.
Call: 01865 339640
Important information
This article is for general information only and does not constitute financial advice.
The suitability and availability of business protection will depend on individual circumstances, policy terms and underwriting.
Protection policies have no cash-in value at any time. If premiums are not maintained, cover will lapse.
Folan Brookes Financial Consultants Limited is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority.
Approved by The Openwork Partnership on 08/10/2026
Sources
MoneyHelper, “Business insurance when you’re self-employed”. Explains that key person insurance can protect a business against financial losses resulting from the death or illness of a crucial member of the company, including an owner, director, salesperson or other specialist. MaPS
HM Revenue & Customs, Business Income Manual BIM45525: “Employees and other key persons”, updated 4 August 2026. HMRC describes key person insurance as cover taken out by an employer against loss of profits arising from the death, critical illness, sickness, accident or injury of a key employee, director or other key person. It also sets out the circumstances in which premiums may be deductible for tax purposes. GOV.UK
HM Revenue & Customs, Business Income Manual BIM45530: “Key persons – non-trade purposes”, updated 4 August 2026. This guidance notes that key person arrangements can, depending on their purpose, also relate to protecting the value of a director’s shares and therefore the value of their estate. GOV.UK
Legal & General, “Shareholder Protection Insurance”. Explains how share protection can provide funds to surviving business owners following the death, terminal illness or, where selected, specified critical illness of an owner, helping them purchase that person’s share of the business. It also highlights the benefit of providing the deceased owner’s dependants with a willing buyer and cash rather than an ongoing shareholding. Legal & General
Legal & General, “Key Person Protection”. Describes how proceeds from key person cover can be paid to the business and potentially used to help meet lost profits, replacement or recruitment costs and other financial consequences following the loss of an important individual. Legal & General
Folan Brookes, “Financial Planning for Business Owners”. The Folan Brookes landing page positions business protection alongside wider financial planning for company owners, including shareholder, key person and partnership protection.
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