Assurance (Business)
Ensure the business remains operational in case of an unforeseen owner or key person death
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Assurance (Business)
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Assurance (Business)
What would happen if you or your key employee unexpectedly died, became disabled or suffered from a serve illness?
What is Business Assurance?
When running a business, the owner will face multiple risks one of those risks being the unexpected loss of a key person due to death, disability or serve illness. The loss of a key person or owner could be detrimental to the business.
Having a well-structured business assurance plan will ensure that the business will remain operational in case of an unforeseen death of the owner or key person.
Types of Business Assurance
Key Person Policy
What is a key person?
A key person is an individual who the business heavily depends on for its success. If a key person were to suddenly die or become disabled, it would result in serve financial loss for the business.
How would a business suffer if the key person were to suddenly die or become disabled?
- The business could suffer direct loss as the loss of the key person may result in a decrease of sales.
- The cost of replacing a skilled employee would be high.
- The business would also need to take into consideration the loss of profits or sales while the new employee is being trained.
How can a business guard itself against this serve financial loss?
A business could take out a key man policy. This would protect the business in case of the sudden death or disability of a key person.
The advantages of taking out a key man policy
- Guarantees that cash will be available.
- The policy will protect existing credit facilities.
- Provide the necessary funds for the recruitment and training of a new employee.
Buy and Sell Agreements
What is a Buy and Sell Agreement?
A buy-and-sell agreement is an agreement between partners, shareholders, or members that provides for business continuity in the case one of the partners, shareholders or members passes away or becomes disabled.
The agreement provides the necessary cash needed by the remaining partner, shareholders or members to purchase the deceased partner, shareholder or member’s interest. A buy and sell agreement is funded by life insurance.
The advantages of having a buy and sell agreement:
- Ready cash when needed
- Prevents business being drained of capital resources
- Eliminates the need to borrow money
- Gives surviving partners complete and unhampered ownership of the business immediately
Contingent Liability
What is contingent liability insurance?
Contingent liability insurance is a policy that the business takes out on the life of an individual who stands surety for the debts of the business.
Why do you need contingent liability insurance?
Start-up costs for a business can be high and the owner may need to take out a loan in his own personal capacity. When taking out the loan the owner will stand surety for it. If due to unforeseen circumstances the owner dies before the loan has been settled his estate will be held liable for the outstanding debt and this will negatively impact the owner’s heirs.
In order to safe-guard the owner’s estate he would need to take out a contingent liability insurance. By having the contingent liability insurance, it ensures that the outstanding loan amount will be fully repaid in case the owner passes away.
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