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Shareholder protection insurance UK, keeping ownership together
Shareholder protection insurance keeps ownership with the people running the business: it funds the buyback of a partner's shares if they pass away or, with critical illness cover, become critically ill (Royal London ↗).
Paired with a cross option agreement, it gives the other shareholders the option and the money to buy the shares from the estate (Royal London ↗).
This guide covers how it works, the three ways to set it up and how it is taxed.
Every claim here is our summary of a named external source, linked beside it. Sources change: check the wording at the link before you rely on it.
What is shareholder protection insurance?
If a shareholder passes away or becomes critically ill, their shares do not simply return to the business.
Royal London says the spouse or family might keep the shares and become involved in the business, or the shares could be sold to an external third party against the other shareholders' wishes (Royal London ↗).
The other shareholders will need finance to buy the shares (Royal London ↗). Shareholder protection insurance provides it: a plan on each shareholder's life, for the value of their shares, pays out so the others can buy (Royal London ↗).
You will also see it called share protection: Legal & General describes a share protection arrangement as one that enables the other owners to buy a late owner's share of the business from their estate (Legal & General ↗).
It is life insurance on each shareholder, which is why some people search for it as shareholder life insurance.
Summarised from Royal London's adviser guide. Check each row at its link.
How shareholder protection insurance works
Royal London says valuing an unquoted company is difficult, and that the company accountants should choose the valuation method after checking the articles of association for restrictions on transferring shares (Royal London ↗).
The shareholders then sign a cross option agreement, also called a double option agreement (Royal London ↗).
Legal & General publishes one designed for shareholders of limited companies (Legal & General ↗).
Cover is taken out in one of three structures (Royal London ↗), and on a claim the other shareholders use the money to buy the shares.
Value
Agree what the shares are worth
The company accountants choose a valuation method, after checking the articles for transfer restrictions.
Agree
Sign a cross option agreement
It gives the other shareholders the option to buy, and the estate the option to sell.
Insure
Put cover on each shareholder
For the value of their shares, in one of three structures.
Buy
The other shareholders buy the shares
On a claim, the payout funds the purchase from the personal representatives.
Three ways to set it up
Royal London lists three main methods: own life plans under business trusts, life of another plans owned by the shareholders, and company owned plans to buy back shares (Royal London ↗).
In the own-life structure, each shareholder insures their own life for the value of their shares, under a business trust for their co-shareholders (Royal London ↗).
In a buyback, the company owns the plans, pays the premiums and receives the proceeds (Royal London ↗), and the Companies Act 2006 sets specific requirements for a valid buyback (Royal London ↗).
Insurer summaries, not HMRC's words. Check each at its link.
The cross option agreement and business relief
A cross option agreement gives the continuing shareholders the option to buy the shares from the personal representatives (Royal London ↗), and business relief stays available (Royal London ↗).
A binding buy and sell agreement would lose it (HMRC ↗).
For critical illness, Royal London describes a single option agreement, so no shareholder can be made to sell (Royal London ↗).
Take legal advice on the wording.
Shareholder protection vs key person insurance
They sit on the same lives but do different jobs.
Key person cover is owned and paid for by the employer, and pays the employer (Legal & General ↗).
Shareholder protection pays the other shareholders so they can buy the shares (Royal London ↗).
They answer different questions, so one does not replace the other.
How much is shareholder protection insurance? Start with the shares
No insurer page we checked publishes a shareholder protection premium, so this page shows none: the price turns on how much cover, and who is insured.
The amount is the value of each shareholder's shares (Royal London ↗).
Royal London would usually consider 7 times net profit before tax plus net asset value a reasonable method (Royal London ↗), with the company accountants deciding the method (Royal London ↗).
Legal & General's list of what sets the premium is under the calculator.
Type your own figures to see the sum the cover would need to fund; nothing is stored or sent.
- Age
- Lifestyle and occupation
- Health and health history
- Smoking
- Alcohol consumption
- Family medical history
- Critical illness, an extra cost
Check the list at the link: (Legal & General ↗)
Is shareholder protection tax deductible?
Generally not.
Royal London says no tax relief is likely on the premiums where the person covered is a shareholder (Royal London ↗).
HMRC's manual says protecting the value of a director's shares, and so their estate, can be a non-trade purpose (HMRC ↗).
LV= says the premiums are normally paid by the individual shareholders, and that if the business pays them they are taxed as a P11D benefit in kind (LV= ↗).
It says each policy is usually written in trust for the other shareholders (LV= ↗).
In a company buyback, Royal London says the proceeds should not be subject to corporation tax because the plan is for a capital purpose (Royal London ↗).
HMRC says business-cover policies that pay shareholders to buy out a shareholder's share after they pass away are not excepted group life policies (HMRC ↗), and Legal & General says its Relevant Life Plan should not be used for shareholder protection (Legal & General ↗).
Tax depends on your facts: check it with your accountant.
Premiums
Relief is unlikely
Royal London: no tax relief is likely where the person covered is a shareholder.
HMRC
Share value is not trade
Protecting the value of a director’s shares can be a non-trade purpose.
Group life
Not an excepted policy
Policies paying shareholders to buy out a share are not excepted group life policies.
Relevant life
Not for this job
Legal & General: its Relevant Life Plan is not for shareholder protection.
Steps summarised from Royal London (Royal London ↗), HMRC (HMRC ↗) (HMRC ↗) and Legal & General (Legal & General ↗). Check each at its link.
Shareholder protection insurance, benefit in kind and who pays
Who pays the premiums decides how they are taxed, and the table sets out the three cases in the insurers' own summaries.
LV= says the premiums are normally paid by the individual shareholders, and taxed as a P11D benefit in kind if the business pays them instead (LV= ↗).
These are the insurers' words, not HMRC's, so check the treatment for your company with your accountant.
Insurer summaries; check each at its link. Tax depends on your facts.
Shareholder protection insurance providers and quotes
We do not quote, rank or recommend a provider.
These insurers publish shareholder protection material we have read, and what each says is in the table.
A quote comes from an insurer or an FCA-authorised adviser; a broker can approach several insurers for you.
Before you buy, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗).
Its register is a public record of firms and individuals it or the PRA has authorised (FCA ↗).
What each insurer's page says, not a ranking. Check each at its link.
Is shareholder protection insurance worth it?
Only you, with an FCA-authorised adviser, can answer that for your business: it is a judgement about your company, and this site does not give advice.
What the insurers set out is what can happen without it.
The family might keep the shares and become involved, or sell them to an outsider, and the other shareholders would need finance to buy them (Royal London ↗).
Tick the questions your shareholders have not settled.
The more you tick, the more there is to take to your accountant, solicitor and adviser.
Nothing you tick is stored or sent.
Tick what is still open
A list of questions, not a recommendation.
Compare shareholder protection insurance options
We do not quote or recommend a provider.
These guides set out the options side by side; an FCA-authorised adviser can tell you what suits your business.
- The legal side
Cross option agreements
What the agreement does, the single option for critical illness, and business relief.
Read the guide → - Premiums and payouts
Shareholder protection tax
Who pays the premiums, benefit in kind, and how each structure is taxed.
Read the guide → - Which job, which cover
Key person vs shareholder protection
One pays the business, the other pays the continuing owners. Side by side.
Read the guide → - The whole set
Business protection insurance
Key person, shareholder, loan and director cover, policy by policy.
Read the guide → - Pays the business
Key person life cover
Life cover the company owns on someone it depends on.
Read the guide → - Key person cover
Key person insurance comparison
What UK insurers publish about their key person cover, with sources.
Read the guide →
Check it for yourself
Every claim on this page is our summary of one of the documents listed here.
We last checked them against the live sources on 28 September 2026.
The documents are the authority, not this page.
Insurers and HMRC update them, so validate any figure or condition at its link before you rely on it.
- Royal London: shareholder protection ↗The need, the three structures, cross and single options, valuation
- Royal London: company share buyback ↗Company-owned plans: ownership, Companies Act, premiums and proceeds
- Royal London: business protection tax implications ↗Tax relief where the person covered is a shareholder
- LV= Adviser: business protection tax treatment ↗Who pays share protection premiums, P11D, and trusts
- Legal & General: Shareholders’ Cross Option Agreement ↗Designed for shareholders of limited companies
- HMRC Inheritance Tax Manual, IHTM25292 ↗Buy and sell agreements, options and business relief
- HMRC Insurance Policyholder Taxation Manual, IPTM7035 ↗Share buy-out policies are not excepted group life policies
- HMRC Business Income Manual, BIM45525 and BIM45530 ↗Key person cover, and share value as a non-trade purpose
- Legal & General key person insurance ↗Who owns, pays for and receives key person cover
- Legal & General relevant life guide ↗Relevant life is not for business protection
- Legal & General: shareholder protection ↗Share protection, what the cost depends on, critical illness, its advisers
- Royal London business protection guide ↗Its usual method for valuing a company
- Aviva business protection (adviser) ↗Business Life Insurance Options, shareholder trusts, cross-option agreements
- HMRC Business Income Manual, BIM45530 ↗Protecting the value of a director’s shares as a non-trade purpose
- FCA Firm Checker and register ↗Check an adviser or broker before you buy
Shareholder protection insurance FAQs, answered
Not financial advice. This page is general information. Before buying insurance, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗). For free guidance, see MoneyHelper.