What would happen to your business if one of your key employees suffered from a critical illness or death? How would this affect your profitability? Have you thought about the financial impact of such an event? If the same thing happened to a shareholder, how would you buy the shares from their next of kin? Do you have plans in place for the financial ramifications this will cause your business to suffer? The same problems that affect people and their loved ones in the event of death or illness can have a similar effect on a business.
If a shareholder dies, or suffers from a critical illness, this insurance plan is designed to pay out in such an eventuality. This is usually predicated with an agreement that gives each party the option to pay the lump sum to the estate of the deceased shareholder or purchases the shareholding of the critically ill shareholder. Having such protection allows the dependents and family of a deceased shareholder to maintain their standard of living and also relinquish the shares to your business which they may not have any knowledge or interest in continuing control or a say in the running of the business. For shareholders who suffer a critical illness, they may need the money to support them through such a time, and may also be ill enough not to return to the business, and therefore receiving a lump sum for the shareholding is the most logical and effective solution.
Key Person Cover
Should a key employee suffer from a critical illness or death, this plan is designed to replace the profit which would be lost in such an eventuality, allowing the business to retain financial security without that person. Many large companies have these protection policies in place, but it is often overlooked by small and medium sized companies who would actually be more detrimentally effected in such a situation. Your business more than likely insures its equipment, but perhaps you’ve not known about the ability to insure your key employees who contribute to the success, profitability and stability of your businesses finances.