My Business protection

If you are the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a buy-sell agreement. Consider business protection in both cases.

keyman insurance

​Insuring the important people in your business

Businesses are severely affected if one of their key employees suffered a critical illness or suddenly died. Anybody with specialized skills, whose loss can cause a financial strain to the company should be insured. The claim amount from such a policy allows you to recruit and train key people, secure and settle loans, offer salary continuation arrangements to the deceased’s spouse, and fund executive compensation plans.

Key person insurance also known as Keyman insurance is essential for business protection, particularly for family businesses or small or start up companies that are highly dependent upon a few individuals. It helps ensure that the company can absorb the financial strain of early death or severe illness and continue smoothly.

You should insure your key person if

  • the business will miss their administration or management contribution
  • their absence will affect business expansion plans or ongoing projects
  • the business will be in danger of losing orders
  • there will be a loss of goodwill or affect suppliers’ credit terms
  • loans or ODs depend on the person

Insure your Company Directors, key salespeople, key project managers, people with specific skills etc. Basically, people essential to the financial success of your company, because it could be the difference between the survival or closure of your business.

business Protection- succession planning

Business –the biggest asset you own

A Family-owned business needs succession planning because, in the event of family owner’s death, an unplanned business can result in a crisis in control and management, Inequality amongst the heirs in sharing the estate. It alters the lives of the family members for good.

When more than one legal heir is there, it is natural that not all may be interested in inheriting the business.  When one of the heirs needs cash for his share of the business, and the others want business, it isn’t easy to raise money to pay off. Such situations result in forced selling of business, against the wishes of the deceased. One of the ways to mitigate this is life insurance equivalent to value of the business. A financial adviser can elaborate more on this.

A good financial adviser can offer comprehensive financial advice which goes beyond investment

Business Continuation

Will your business continue after you?

You are the biggest asset for your business

If the business owner dies or becomes incapacitated, the business and the family face many challenges. If the business owner dies, then choices for the family are Liquidate the business, manage the business by an executor, try running the business or sell the company to an employee.

If the business must continue, the challenges are:

  • Repayment of debts
  • Short Term Losses until the spouse/children start understanding the business (if they were not involved in the company in the first place)
  • Non-availability of new loans because of loss of credibility
  • Taking care of household expenses until the business settles down 

If the business must be liquidated, the challenges are

  • Valuation of the business is a concern in the absence of the business owner
  • Finding a suitable buyer
  • Settlement of debts
  • Equal distribution of wealth in case of more than one heir
  • Regular income to family post liquidation

A good financial adviser can offer comprehensive financial advice which goes beyond investment.

Partnership Protection

Financial implications of partner’s death or critical illness

Business continuation and retaining control if one of the fellow partners was to pass away or suddenly leave due to illness or injury.

The possibilities if one of the partners passes away- the deceased partner’s legal heir steps into the business or they may demand cash for their share of the company which will pose challenges such as –

  • the surviving partners may not like them
  • there may be an incompatibility
  • the heir sells stake to an outsider
  • the incompetence of the new partner
  • the firm may not have adequate funds to pay off which can lead to the liquidation of the firm

To avoid such scenarios, the experts recommend a Buy-Sell agreement. This legally valid document provides the surviving partners with the option to purchase the business from the deceased partner’s legal heirs. However, the challenge is to fund the buyout where partnership insurance solutions can help. The business protection solutions will depend on the business structure you have.

A good financial adviser can offer comprehensive financial advice beyond investments and find solutions to your business challenges.

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