What Is Business Protection
Prudent business people will always take steps to minimise the risk to their business. Despite the importance many business owners omit to protect their business from the financial problems that might arise following the premature death of Business Partner, Co-Director or Key-person within their organisation.
While insurance cannot lessen the emotional loss caused by the death of a colleague, it can help minimise the financial impact to a business or family. There are a number of different structures that can offer protection to a business and the deceased shareholders next of kin and the specific solution relevant to you will depend on your business structure and needs. The four main structures are as follows:
The four structures are explained in some detail on the page below
Partnership Protection
Partnership Insurance can provide the funds to enable the continuing partners to buy out the share of a partner on his or her death. A legally binding agreement is drawn up and one or more life cover policies are put in place. This ensures that the funds are available to the continuing partners to buy the deceased partner’s share of the firm when needed.
The main benefits of a Partnership Insurance are
- Allows you to put the structures in place now, to deal with the business consequences of your death or one of your fellow partners
- The surviving partner(s) retain full control over the firm, as they are in a position to immediately buy back a deceased partner’s share if they so wish
- The next of kin have certainty that they can immediately realise the value of the deceased’s share of the firm by way of a capital lump sum
In today’s uncertain world, Partnership Insurance offers very valuable peace of mind.
Co-Director Insurance
Co-Director Insurance can provide the funds to enable the surviving shareholders to buy out the shares of a shareholder on his or her death. A legally binding agreement is drawn up and one or more life cover policies are put in place.
This ensures that the funds are available to the surviving shareholders to buy the deceased partner’s share of the firm when needed. The main benefits of a Co-Directors Insurance are
- It allows you to put the structures in place now, to deal with the business consequences of your death or one of your fellow directors.
- The surviving director(s) retain full control over the company as they are in a position to immediately buy back a deceased director’s share if they so wish.
- The family/estate of the deceased shareholder realise and receive the value of the shares in cash.
A Co-Directors insurance agreement pre-empts the problem before it occurs, obtains agreement from all parties and provides the funds if needed to match the solution.
Corporate Co-Director
Corporate Co-Director Insurance is an arrangement between a private trading company and one or more of its shareholding director’s which enables the company to buy back a shareholder’s stake in the company from their personal representatives on death, when needed.
A legally binding agreement between the company and its’ shareholders is drawn up and one or more life cover policies owned by the company are put in place. This ensures that the company has the funds available from the life cover policy proceeds to purchase the shares from the deceased’s estate within a specified period after their death. The next of kin receives the value of the deceased’s shareholding The main benefits of a Corporate Co-Directors Insurance include:
- The surviving director(s) retain full control over the company as funds are available to ensure the deceased’s shares are bought back by the company and cancelled.
- The family/estate of the deceased shareholder realise and receive the value of the shares in cash.
A Corporate Co-Directors insurance agreement pre-empts the problem before it occurs, obtains agreement from all parties and provides the funds if needed to match the solution.
Key-Person Insurance
The ultimate aim of a Keyperson policy is that it allows your company to put the structures in place NOW to protect your business financially following the death of a leading figure in your organisation. The main benefits of a Keyperson policy include
- Having cash to meet the financial obligations of outstanding loans OR loss of profits to help maintain business continuity in the event of premature death.
- Maintaining confidence – helps reassure other valued employees and clients that the company has taken steps to ensure the organisations future is secure