Case Studies

Business Insurance - Partnership Case Study

Simon and Sarah operate a large retail business in partnership. They have developed the business from ‘scratch’ and now believe that the business to be worth $1Million.

The partners bring different but complimentary skills to the business and Sarah is concerned that in the event of death or Total Disablement of either partner that there be sufficient funds available to pay out their respective values.

Simon has a blended family arrangement with Sarah being married with young children.

Neither partner has sufficient capital to purchase the other's interest, and neither wants to consider being in partnership with their partner's family.

Sarah sought the advice of a personal insurance adviser who recommended establishing Life and TPD cover on each partner’s life to the value of $500,000. In conjunction with their Solicitor, a ‘buy/ sell’ agreement was established which required that in the event of death or TPD of either party then the insurance proceeds would be used to pay out the relevant share and the affected share would be transferred to the surviving partner.

This strategy provides certainty to all parties ensuring that funds are available in the event of death or disablement, the deceased estate receives adequate compensation for their share of the business and the surviving partner can operate the business without external interference.