Protection when you are a Company Director, Self- Employed or a Contractor.

Business Protection for Company Directors, Self-Employed and Contractors: What You Need to Know.

When you’re a company director, self-employed professional, or contractor, your income and financial security are directly tied to your ability to work. Unlike PAYE employees who may benefit from workplace benefits such as sick pay, death-in-service cover or group income protection, you are often solely responsible for arranging your own financial safety net, and potentially that of your business too.

At Endemeo, we specialise not only in helping you secure the right mortgage but also in helping you protect your income, business, and loved ones with the right business protection policies. In this article, we’ll explore key types of cover, including Relevant Life, Key Person Insurance, and Personal Protection such as Life, Critical Illness, and Income Protection, and explain how these differ when you're self-employed or running your own business.

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1.   Relevant Life Insurance in Trust – A Tax-Efficient Way to Protect Your Family.

What is it?
Relevant Life is a life insurance policy paid for by your limited company, written in trust for your beneficiaries. It's designed for directors and employees, and it does not count as a benefit in kind, meaning no P11D reporting or income tax consequences.

Why It’s Important for Company Directors:

• Premiums are paid by the business and are usually tax-deductible.

• Payouts are made tax-free to beneficiaries.

• Avoids National Insurance charges (unlike many personal policies).

Example:
John, a company director earning £75,000 per year, wants £500,000 of life cover. Instead of paying premiums personally (from taxed income), his company pays through a Relevant Life Plan, saving corporation tax and personal income tax, while still protecting his family.

Considerations:

• Not suitable for sole traders or partnerships.

• Must be written into a discretionary trust to ensure tax efficiency.

Solution:
Work with a protection specialist who can ensure the policy is set up correctly in trust and meets HMRC guidelines.

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2.   Key Person Insurance – Protecting the Business from the Loss of Vital Staff.

What is it?
Key Person Insurance provides a lump sum to the business if a critical employee or director dies or is diagnosed with a serious illness. It helps cover lost profits, recruitment costs, or repay business debts.

Why It Matters for Contractors and Small Businesses:

• If you are the sole income generator in your business, your absence could halt operations.

• For small limited companies, losing a director or key contractor can financially cripple the business.

Example:
A digital marketing agency with three staff relies heavily on its founder/director. If he becomes critically ill, client projects stop. Key Person cover provides a financial cushion to manage staff costs or hire interim support.

Challenges:

• Accurately valuing a “key person’s” contribution can be difficult.

• Requires careful underwriting to match the policy to actual business needs.

Solution:
An adviser familiar with small businesses can help determine an appropriate sum assured and structure the policy so it's both tax-efficient and tailored to your operations.

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3.   Life, Critical Illness, and Income Protection – Personal Cover Still Matters.

While business-focused cover is important, self-employed individuals and directors often lack basic personal protection such as:

• Life Insurance – to support your family if you pass away.

• Critical Illness Cover – pays out a lump sum on diagnosis of serious conditions (e.g., cancer, stroke, heart attack).

• Income Protection – replaces a portion of your income if you’re unable to work due to illness or injury.

Key Differences from PAYE Employees:

• PAYE staff may have group cover or sick pay – you often have none.

• Self-employed or limited company directors may face more underwriting due to income variability.

• Premiums may vary depending on how you draw income (salary vs dividends).

Example:
Sarah, a self-employed architect, earns £60,000 per year but has no employer benefits. After a back injury, she is unable to work for six months. Without income protection, she depletes savings quickly. With cover, she'd have received up to 60–70% of her income monthly, tax-free.

Common Barriers:

• Income must be evidenced over time.

• Contractors with short-term contracts may be seen as higher risk.

• Some providers require stricter medical underwriting for business owners.

Solution:
Work with a protection expert who can access specialist providers with tailored underwriting for self-employed and contract workers. Some insurers will base cover on contract day rates, or average income, rather than requiring extensive employment history.

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Why Specialist Advice Makes the Difference.

Not all protection products are equal, and not all insurers view self-employed or director income the same way. Working with an experienced protection adviser who understands complex income and business structures ensures that:

• Policies are written correctly (especially in trust when needed).

• Cover is appropriately valued and tax-efficient.

• Applications are packaged in a way that improves underwriting outcomes.

• The right provider is chosen from a broad panel, including specialist insurers who cater to contractors, directors and small business owners.

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Final Thought: Protect the Business You’ve Built.

You’ve worked hard to establish your business and income. Protecting it – and your family – is just as important as growing it. While business protection may be more complex than a standard policy, the right advice makes it achievable and cost-effective.

At Endemeo, we specialise in helping company directors, self-employed professionals and contractors secure tailored protection solutions from leading and specialist insurers.

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Let’s help you safeguard your future – so you can focus on building it.

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