Business Protection Insurance

Business Protection Insurance

  • The right life cover arrangement can make sure your business survives and prospers

The future success of every business is dependent on a few key people. The likelihood of a business failing greatly increases when a founding member or key person in the business dies. Is your business covered?

>> What is Business Protection Insurance?
>> How does Business Protection Insurance work?
>> Do I need Business Protection Insurance?
>> How much does Business Protection Insurance cost?

What Is Business Protection Insurance?

Regardless of what business sector you operate in, your Company’s ongoing success often depends on a number of key individuals for example Directors, Shareholders or Business Partners. Without these individuals, the future success of your business could be at risk.

A Business Protection Insurance policy is designed to allow you to put structures and arrangements in place to financially protect your business should you or one of your key people die or suffer a serious illness. This policy provides a cash lump sum to help you and your business deal with the ensuing challenges which may comprise;

  • A fall in company profits
  • Difficulty in paying your company bills
  • Recruiting a replacement
  • Repaying outstanding bank loans especially those where personal guarantees were granted
  • Purchasing a deceased Partner’s or Director’s share of the business and ensuring their estate receives the appropriate market value

How Does Business Protection Insurance Work?

There are 3 main types of Business Protection Insurance Policies:

1. Keyman Insurance

A Key person is any ‘key’ employee, director or consultant on whom your business depends for its continued success. Should such an individual die or suffer from a serious illness, your business could suffer a serious financial loss as a result.

A Key man Insurance policy is designed to pay out a lump sum payment to the business should such a situation occur.  This lump sum payment will compensate the business for any loss of profit, can be used to repay loans, or recruit a suitable replacement.

2. Partnership Protection

Businesses based on partnership structures are also at risk in the event of the death or serious illness of one of the partners.  Such an event can cause financial hardship for the remaining partners and may even result in cessation of the business itself.
By having a Partnership Protection Insurance policy in place, you can protect both yourself and your business partners as well as your/their next of kin:

  • A lump sum payment will be made to the remaining partners to buy back the deceased partner’s share of the business, thereby ensuring that the remaining partners retain full control of the business.
  • The deceased’s next of kin can rapidly realise the value of the deceased partner’s share of the business for a capital lump sum.
  • The remaining partners can inherit the deceased’s share of the business without incurring inheritance tax.

3. Corporate Share Buy Back Protection

The death or serious illness of an individual shareholder can have major implications for the remaining shareholders of the company.  Such an event can cause immediate financial hardship for the remaining shareholders and can jeopardise the future of the company.

Having Corporate Share Buy Back Insurance in place can significantly benefit the remaining shareholders as well as their and the deceased shareholder’s next of kin:

  • A lump sum payment will be provided to remaining shareholders to buy back the deceased shareholder’s shares from their next of kin. This ensures that the remaining shareholders retain full control of the company.
  • The deceased’s next of kin can rapidly realise the value of their shares and are assured of receiving a fair price.
WHAT’S COVERED? WHAT’S NOT COVERED?
√     Keyman Insurance: lump sum payment to the business on the death or serious illness of the insured key person. X    Death or Illness due to self harming, alcohol, drug or solvent abuse.
√    Partnership Insurance: lump sum payment to the remaining partners to buy back the deceased partner’s share of the business from their next of kin.     X    Death or Illness resulting from dangerous or criminal activities.
√      Corporate Share Buy Back Insurance:lump sum payment to the remaining shareholders in the company to buy back the deceased shareholder’s share of the business from their next of kin.     X    Death or Illness caused by a pre-existing medical condition which was not disclosed upon application.

Note: Specified Illness benefit is an add-on feature and only covers the illnesses specifically
 outlined in the policy document.

Do I Need Business Protection Insurance?

When considering a Business Protection Insurance policy, you should ask yourself the following questions:

  • How would your business survive if one of your key employees or shareholders became seriously ill or died suddenly?
  • If your business partner died what would happen to their share of the business?
  • How would you feel about a shareholder’s family joining your business if he/she died suddenly?
  • If you died what would happen to your share of the business?
  • Are any of your family members in a position to take your place in the business?
  • How would your family survive financially?

How Much Does Business Protection Insurance Cost?

The cost of a Business Protection Insurance policy varies from person to person and depends on a number of factors, including:

  • Your age
  • Your gender
  • Your smoking status
  • The amount of cover you require
  • The term of the policy
  • Are additional benefits required?
  • Your health and medical history

How Can I Get Further Information on Business Protection Insurance?

For further information on Business Protection Insurance or for a competitive quote, call our team today on 021 427 7000 or email us .