Business Insurance

Partnership Insurance - Where there is a Will there is a Way! 

Business partnerships are generally established due to the complimentary skills of the participants as well as their knowledge and financial contribution.

The impact of one partner/shareholder dying or becoming permanently disabled could have a catastrophic effect on the business in terms of the confidence of financiers, customers and suppliers.

The greater challenge is that without a formal agreement in relation to any share transfer or a funding mechanism for that share transfer, you may find yourself losing a business partner but gaining a business partner’s spouse! This could lead to very unhappy ‘bedfellows’!

A solid risk protection strategy is to establish insurance on each partner/shareholder for the value of their share of the business. This insurance is supported by a legal ‘buy-sell’ agreement which requires that when a trigger event occurs e.g. death, the estate is entitled to the insurance proceeds in exchange for the deceased person’s share of the business.

The ‘buy-sell’ agreement establishes a formula for determining the share value and binds the estate to release the control of the business to the remaining partners. The insurance policy provides the funds to pay for the share. The cost of cover would be a fraction of the cost of raising additional capital and eliminates the need to bring in any additional participants or negotiate with the estate in relation to the value/ sale of the share.

Obviously, legal and accounting advice should be sought in relation to these issues. We are able to establish appropriate insurance cover and make introductions to legal professionals with experience in this area.

Contact us for an obligation free discussion.

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Key Person Insurance - Wouldn’t Be without Them!

Regardless of your Business value, the biggest asset in most cases is the key decision-makers. Without them, the other assets, at best are static. It is the people with the ideas, the drive the skills and ingenuity who generate the profits and who ensure that there will be profits tomorrow as well as today.

Without these key people, there may be a negative impact on sales, a loss of access to markets, a loss of reputation, and even the loss of banker’s confidence.

By utilising Key Person Insurance, the business can own a policy to protect against the death, total disablement or the effect of a serious medical illness (i.e. Heart Attack, Cancer, Stroke etc) so that funds are available to meet a number of business needs including:

• Cash available to offset the likely drop in profits during the readjustment period.
• Cash available to enable the business to attract the most suitable replacement without financial constraints.
• Cash available as a buffer against diminished goodwill and credit standing.
• Cash available to allow any existing expansion plans to proceed uninterrupted.
• Cash available for liquidation of outstanding debts and for the strengthening of working capital, which in turn may protect the business’s viability.

Formal accounting advice should be sought in regards to the tax implications of such cover.

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Debt Reduction Insurance - Money to pay the Piper!

Bank Loans provided to businesses are generally supported by a lien over the business, the personal guarantee offered by the principal and in some cases by security over their private dwelling.

• What happens to the repayment obligation and the security offered in the event of your death, total disablement or serious medical illness of one of the principal?
• Will the personal guarantee still be enforceable?
• Will any mortgage over the family home still be valid?
• How does your business or your family raise the necessary money to repay the loan?

By utilising Debt Reduction Insurance, an insurance policy can be established on the life of the principal that will repay the debt in the event of the death, total disablement or serious medical illness. 

Contact us today for an obligation free consultation.

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