Business Insurance – Protecting Owners and Partners
One of the biggest risks business owners and partnerships face is the risk of a key person or partner suffering a premature death or total & permanent incapacity. In a typical small business, a shareholder’s agreement is there to protect each shareholder and outline specific mechanisms by which parties may decide to exit the company. However, what if the choice wasn’t there for a smooth transition If you or your company partner were to pass away prematurely would the business, and remaining shareholders can pay out the deceased’s family? Even if the assets or cash were there to do so, would there be a better alternative?
A simple Key Person business plan protects the remaining owners of business by ensuring that the policy may be there to ensure:
- The remaining owners can buy out the deceased’s equity in the business
- Protects business owner’s families by making sure that if something were to happen to them, their families would be paid out for their share in the value of the enterprise.
- Protect remaining owners by providing a lump sum to help with replacing income derived by the Key Person in the event of death, injury or illness that results in total and permanent incapacity.
A key person policy can also protect other important people in the business such as:
- Company owners and Directors
- Financial Controllers
- Sales Staff and,
- Business Development and Relationship Managers
In these situations, the policy is designed to help address one or more of the following problems:
- Profitability being adversely affected
- Considerable time and money in recruitment and training
- The momentum and efficient management of the company
- The goodwill and credit rating may be threatened
Broadly speaking, the policy, if established to protect the revenues and profitability of the company would mean that the premiums and benefits payable are tax deductible and taxable respectively. If the policy is established to protect primarily against balance sheet items such as providing funds for the repayment of debts, goodwill or buyouts would mean that the premiums are not tax deductible and the benefits payable being tax-free.
Details of policies available
Life Only: To pay out a lump sum in case of death
TPD: To pay out a lump sum in the event of illness or injury which results in total and permanent incapacitation
Critical Illness: To pay out a lump sum in the event of the life insured suffering a pre-determined disease. (such as Cancer, Stroke, Coronary failure or Heart Attack, Kidney Lung or Liver Failures, etc. etc.)
VFS Group can evaluate the risk of your business as it stands and recommend the most appropriate level of protection required for your business. We will then work for you to find the best available policy in the marketplace to meet your needs. Owning our own Australian Financial Services licence means we are not aligned to any one provider or insurer, and thus, we always work in our client’s best interest to find the most suitable and affordable policy.