Many business owners forget that their most important business asset is themselves.
In the event of their death, or if they are diagnosed with a serious illness, what arrangements have been put in place to ensure the continuation of the business, to secure its value and maintain an income for their financial dependents?
- Will your family survive financially without you?
- Will your business survive your death?
- If you have business partners, who provides for their family if they die?
- How long can the business cashflow the dependents of a deceased director?
The advisory team at MoneyCoach has decades of experience in ensuring that business owners and their families do not have to sell business assets suddenly or unnecessarily, by putting adequate life and specified illness policies in place to replace lost income or to fund the purchase of shares from a deceased partner’s financial dependents.
Obviously then, sound financial advice is important. MoneyCoach have qualified advisors who can assist you in making informed decisions. Why not contact us here?
An Introduction to Business Protection
The term Business Protection relates to the covers a business should have in place to protect itself from the death or serious illness of one of the owners of the business or an employee who is key to the ongoing success of the business.
The term can also extend to include employee benefits such as death in service and income protection covers.
Types of Business Protection
Key Person Insurance
This cover provides a business with a lump sum on the death of an employee or their being diagnosed with a serious illness. Typically, this individual will be vital to the success of the business from a financial or strategic point of view and without their input, the business may suffer losses of income or customers, or have borrowings called in by their banks.
Typically, the shareholders of unquoted companies need a mechanism to facilitate to realisation of the value of their shares for their financial dependents in the event of their sudden death. The surviving shareholders also need a means to purchase the shares and may not be able to borrow from a bank for this purpose.
There are two types of Shareholder Protection; Personal, where the individual shareholders take out a life policy and; Corporate, where the Company arranges and pays for the life cover on the shareholders.
In the event of their death, the policy will provide the funds to assist the surviving shareholders or the Company in the purchase of the deceased shareholders shares from their personal representatives. This ensures that the surviving shareholders retain control of their business and that the family of the deceased shareholder receive adequate compensation for divesting their share in the business.
Similar to Personal Shareholder Protection, each partner must arrange and pay for a life policy on their own lives for the benefit of the partnership, or the partnership take out policies on the lives of the individual partners.
The proceeds are used to assist the partnership in compensating the deceased partner’s financial dependents for their entitlements under the partnership agreement.