I have blogged about Business Protection before but think it is worth recapping on as it is a vitally important part of what we as Financial Advisors can do to assist Business owners. As Business owners, the fear is that if key people and/or business owners fall ill or die, that the business will ultimately cease too. Despite years of hard work to ideally pass it on to one’s family, without the financial means to buy out a share of a business or simply replace a key person, and the legal plan in place to effect this, the business will not survive.
Whilst it is always essential to seek legal and taxation advise in putting such a business protection plan in place, we can offer the appropriate life plans required.
So what is Business Protection & should you have it?
Business Protection broadly covers the ability of any business to pay off loans, protect profits and/or buy a deceased’s co-owner’s share of the business. A key person in a business may also need to be protected.
I will briefly outline the various types of business protection coverage;
Keyperson Assurance:
Keyperson Assurance is life assurance and/or specified illness cover taken out by an employer on a key director or employee, to protect the employer from the financial consequences of that individual’s death or illness*. Putting Keyperson Assurance in place provides the business with a lump sum payment which can help protect against loss of profits that may arise from the death or diagnosis of a specified illness of a key director or employee, much in the same way as a company will normally insure against loss of trading profits resulting from fire and other risks.
Partnership Assurance:
The main objective of Partnership Assurance is to ensure that the surviving partners receive the necessary funds to purchase the deceased partner’s share in the business. Under this arrangement, the surviving partners purchase their deceased colleague’s shareholding from his/her estate at market value.
Co-Directors Insurance:
The main objective of Co-Director’s Insurance is to ensure that the surviving directors receive the necessary funds to purchase the deceased director’s shareholding in the business. Under this arrangement, the surviving directors purchase their deceased colleague’s shareholding from his/her estate at market value.
Company Share Buy Back:
Corporate Co-Director Insurance gives the company the security that there will be funds available to buy back shares if a director dies and in doing so maintain its control over the company’s affairs.
You will wish to protect your business in the event of the unexpected happen. If you want to review your need for the type of business protection which applies to your business, do contact us at 053 9233640.
