In my last session on Small businesses, I want to discuss Business Assurance. Many business owners do not have business assurance and if they do, they may not have enough cover. Business assurance is designed to protect the business and business owners.
A Buy and Sell Agreement serves to protect the shares of the business in the event of death or disability of a partner. The agreement is a legally binding contract which on the death or disability of a partner, the remaining partner has to buy the deceased/disabled partners interest and the deceased’s estate / disabled partner will sell the interest at a predetermined price. One method to fund this purchase is by using life assurance.
The advantage of a Buy and Sell Agreement is it provides the surviving partners with cash to purchase the shares from the surviving spouse. It provides cash to the surviving spouse with sale of the shares and it enables the surviving partners to attract a new business partner with the additional shares.
Key person insurance protects the business in the event of a partner dying or becoming ill. It can provide the surviving partner with cash flow till they are able to secure a new partner. It also providers the business with cash should one of the key people be unable to work due to illness.
Business Contingency Assurance is required in the event of a member or partner signing personal surety for company loans. The Company takes a policy on that person’s life in the event of death as the deceased estate will have a claim against the company in the event of death.
As Business Assurance is a mind field and needs to correctly structured, I would advise you to seek the advice a Certified Financial Planner to get accurate advice.
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