Keyperson Insurance

  • Provides your business with a lump sum payment should one of the key people within your business either die , suffer a specific trauma condition ( heart attack , cancer etc ) or become totally and permanently disabled ( TPD )
  • The insurance proceeds can be used to clear debt ( capital purpose ) so that the banks are taken out of the equation while the insured recovers , or used to replace lost revenue or fund a replacement person ( revenue purpose ) while the insured recovers and eventually returns to work.  If the insured dies or suffers a significant long term injury or illness then the insurance proceeds  can be used to buy time while important decisions are made as to the future of the business

Shareholders Cover or Buy/Sell Insurance

  • Properly structured shareholders cover backed up by a written and signed shareholders agreement is a necessity for any business that has more than one owner
  • Insurance policies equal to (or part thereof) the value of each shareholders' equity in the business can be taken out for Death, TPD and Trauma on each of the shareholders. In the event of a claim the insurance proceeds are paid to the shareholders' beneficiaries and represents payment of the equity held.At the same time shares are transferred to the remaining shareholders who continue to run the business without unneccessary inturuptions from third parties.
  • In simple terms , if there are three equal partners / shareholders in a business valued at  $1.5  Million ….. a Life, Disability and Trauma policy for $500,000 each is taken out representing each shareholders equity.
  • In the event of the death ( or disability or trauma ) of shareholder A the insurance proceeds are paid to either the insured, the estate or beneficiaries of A and their shares transferred to the surviving shareholders  ( B and C ) on a pro rata or agreed basis. Shareholders B and C then continue running the business as they see fit without unnecessary interruptions from the partner / spouse of A and at the same time the beneficiaries of A are paid a fair price for their equity.
  • The alternative to using the insurance proceeds to pay out A are to either sell assets or borrow to fund the payout … both of which can take time depending on markets / conditions at the time and are significantly more expensive than the cost of the insurance premium.

Business Overheads Insurance

  • Provides reimbursement of the fixed operating expenses of your business if you cannot work due to sickness or injury. This covers the fixed running costs of your business for up to 12 months and can be taken in conjunction with personal income protection which covers your personal salary / drawings

It is important to have any of the above insurance covers structured correctly and held within the correct business entity. In addition any cover taken out should be clearly outlined in minutes from a directors meeting so that all involved are aware of what has been put in place

Speak to one of our advisers to ensure you have appropriate cover in place to safeguard the survival of your business

Business Insurance Resources