Most business owners will take steps to minimise risk to their business – insuring property, equipment, vehicles, etc.
While these are sensible precautions, what would happen on the death of key people, partners, or directors?
Successful companies are made up of people with experience, knowledge, management expertise and vital business contacts.
Without these people the business might not succeed. Business Protection is designed to protect a company against some of the costs associated
with the death of a key employee, director, or partner, much like business insurance protects against loss of profits resulting from fire or flood.
Depending on the nature of a business, there are four types of Business Protection:
- Co Director’s Insurance
- Corporate Co Director’s Insurance
- Partnership Insurance
- Keyperson Insurance
- Co-Directors Insurance :
The death of a company director can have a serious impact on the surviving directors and the deceased’s successor. Ideally, if there is sufficient cash in the business, the surviving directors would buy out the deceased’s estate. Co-Directors Insurance ensures that this cash is available. Each director takes out a life assurance policy on their own life, in trust for the surviving directors. If a director dies, the surviving directors would then have the cash to enable them to buy back the shares from the deceased’s estate.
Partnership Insurance :
The death of a partner can affect a business in different ways. If there is no partnership agreement in place then the partnership could be dissolved in law. If a partnership agreement exists and the partnership is not dissolved, then the surviving partners would become liable to the deceased’s estate for their share of the partnership.With Partnership Insurance, each partner takes out a policy on their own life, in trust for the other partners. Upon the death of a partner, the proceeds of the life policy would then become payable to the surviving partners, enabling them to buy out the deceased’s next of kin.
Keyperson Insurance :
The aim of Keyperson Insurance is to protect your company on the death or specified illness of a key employee by paying out on the financial loss incurred by either of these events. The company takes out an insurance policy on the life of that key employee, ideally until retirement age. The company pays the premiums and then receives the benefit if the employee dies or suffers a specified illness.