Income Protection For Insolvency Practitioners

This is what separates insolvency from almost every other professional practice, and it is worth understanding before deciding how much cover to hold.

An insolvency practitioner is licensed by a recognised professional body and appointed as office holder in their own name, with personal statutory duties and a bond for each case. A colleague in the same firm, however capable, is not the office holder.

So if a practitioner cannot act, the cases need to be moved to somebody who can, and that generally requires a formal process, typically an application to court for a block transfer of appointments. The specifics are a matter for the recognised professional body, the legislation and the firm's own solicitors rather than for us.

The insurance relevance is sharp. A long absence does not just stop fee income, it creates a legal and administrative exercise that costs money at precisely the point the income has stopped. That is an argument for sizing cover above personal income alone, and for a shorter deferred period than a salaried professional would choose.

There is a feature of this work that is rarely written down and is a genuine cause of long absence.

An office holder delivers unwelcome outcomes to directors, employees and creditors, is accused of things, and sometimes faces abuse or threats. Attending premises to take control of assets can be confrontational in person. Done for years, that accumulates.

If it has contributed to anxiety, depression or any time off, declare it properly, including medication and therapy. Our page on depression and anxiety covers what we would ask. It is far better underwritten than discovered at claim stage, and this is a profession where an incomplete application would be noticed.

Practitioners at larger firms usually have death in service, often a good multiple; sole practitioners and small-firm principals have none.

A practice has value in its case portfolio and its referral relationships, and realising it is complicated by the appointments being personal, so a family cannot simply sell the book.

That argues for working out the sum assured properly rather than estimating, and for considering shareholder or partnership protection separately where there is more than one principal.

The events that end this career early are usually cognitive or cardiac, and they can leave somebody able to work and unable to carry personal statutory responsibility.

That is a permanent change rather than an absence, and it arrives with the cost of transferring live appointments attached.

A lump sum on diagnosis covers both the transition and that transfer exercise, and it pays without waiting out a deferred period, which matters when the cases cannot wait either.

A small insolvency practice has unusually high fixed costs: professional indemnity, bonding, recognised professional body fees, regulatory monitoring, case management software and staff.

Professional indemnity works on a claims-made basis, so a practice that stops still needs run-off cover for claims arriving afterwards, which is a cost attached to stopping.

Cover can be sized with those continuing costs in mind as well as personal income, and where there is a limited company, executive income protection lets it hold and pay for the cover rather than it being funded personally.