Business Protection

Business Protection

As every businessperson knows, the cornerstone of any good business is strong financial planning. With the right cover, your business remains protected, if the unexpected should occur.

Keyman Insurance

For many companies, the people that work for them are their most valuable assets. Most businesses have one or more senior personnel whose experience, skill and industry knowledge are vital to the ongoing success of the business. Yet while almost all firms insure their premises, equipment and goods against fire, theft and flood, many do not insure themselves against the loss of key people that keep the company running successfully.

When you lose a key member of staff through death or illness, whether it’s a director, a senior manager or your best sales person, you could stand to lose all this as well:

  • Industry expertise
  • Insights in customer and competitor trends
  • Managerial experience
  • Bargaining power with suppliers
  • A key contact with vital customers
  • Creditworthiness

With a Key Person insurance policy, if you lose one of your most important members of staff, you’ll get a lump sum that can protect you against any disruption to the business, resulting from a fall in profit or productivity. Alternatively, it could be used to pay off any unprotected loans.

 

 

The loss of a business partner or shareholder can have serious implications for any company. In the case of the death of a business partner, as well as losing a key contributor to the management of the organisation, shares in the company can pass on to their immediate family, which can pose questions for the business going forward:

  • Will the family want to become involved in the strategic direction of the business?
  • Will the remaining business partner(s) want to work with the new shareholders?
  • Will the partnership have to pay an income to the new shareholders?
  • Would the family prefer a cash payment instead of a stake in the business?

Partnership Protection Insurance protects both the company and the new shareholders in the event of the death of a partner.

How it works:

  • An agreement is drawn up by the shareholders by which they agree to buy back the shares in the event of the death of one of the partners from their representatives.
  • A life assurance policy is taken out by each partner to provide a fund for the buyback of shares in the event of their death. Each partner is responsible for their own life assurance premium.

The Benefits

  • The surviving partners retain control of the company, as the deceased’s shares are cancelled.
  • The dependants of a deceased partner can realise their shares for cash, shortly after death.
  • The cost of the life assurance policies is borne totally by each individual.

It’s a good idea get legal and financial advice before taking out Partnership Protection Insurance as there may be circumstances where this arrangement may not be suitable.

The loss of a major shareholder can have serious questions for the company owners and other shareholders:

  • What happens if the shareholder’s family want to be involved with the strategic direction of the business?
  • Will the company directors want to work with a new shareholder?
  • Will the firm have to pay ongoing dividends?
  • Would the new shareholder(s) prefer a cash sum?

In this case, a contract can be drawn up by which the company buys back the shares in the event of the shareholder’s death. As a result, Shareholder Protection Insurance could prove invaluable to protect the company from a major loss.

The process

  • The company enters in an agreement to buy back the shares from the shareholder’s representatives on death.
  • A life assurance policy is taken out on every shareholder agreement to cover the fund required to buy back the shares in the event of the shareholder’s death. In this case, the company pays the policy premium.

The Benefits

  • The surviving shareholders retain control of the company, as the deceased’s shares are bought back by the company and cancelled.
  • The dependants of a deceased shareholder can realise their shares for cash, shortly after death.
  • The cost of the life assurance policies is borne totally by the company, and not by the shareholders personally.

It’s advisable to get legal and financial advice before entering into an agreement regarding Shareholder Protection Insurance, as there may be circumstances where this arrangement may not be suitable.

Financial Planning Standards Board

Professional Insurance Brokers Association

Certified Financial Planner