Shareholder Protection Insurance, protect the future of your business
Shareholder Protection Insurance can provide a succession plan for your business if a business partner becomes disabled, dies or is critically ill.
- Pays out in the event of a shareholder’s disability or death
- Help build succession planning into your business plan
- Ensures the beneficiary’s estate is protected
What is Shareholder Protection Insurance?
Shareholder protection insurance, also called buy/sell agreements, allows business owners to buy shares back from any partner upon diagnosis of a critical illness, terminal illness or death. This policy enables surviving owners stay in control and minimises disruption to the business. The deceased owner’s dependants have a willing buyer and cash instead of a share of the business.
Common reasons for taking out shareholder protection insurance include:
- Maintaining control of the business by being able to buy the deceased’s or critically ill person’s shares
- Making the transition of shares from one owner to another as smooth as possible.
How does Shareholder Protection Insurance work?
Shareholder protection insurance is a contract between all the shareholders of your business, which sets out exactly what will happen if one of you can no longer participate in running it. You can insure against the death of a shareholder or serious illness or injury. The agreement allows the remaining shareholders to buy their shares in the business at an agreed price, using a lump sum payout from your insurance policy.
What are the key benefits of having a Shareholders Protection Plan?
- Shareholder protection can be paramount for small businesses since many smaller firms might struggle to raise buy-out capital at short notice.
- Businesses don’t need to save up capital or dip into their savings for funds to purchase an outgoing shareholder’s stake in the firm.
- If a shareholder dies without a policy in place, their stake in the business could be inherited by an unwelcome beneficiary or sold to a rival.
- The insured person’s beneficiaries have clarity over the amount they will receive for the company shares when the other shareholders buy them out.
Looking for expert advice about Shareholder Protection Insurance?
Request a free callback with an adviser who can help you find the most suitable policy to meet your specific company’s needs and budget.
Is shareholder protection insurance worth it?
Yes, shareholder protection insurance is worth it because it is the most efficient means of providing buy/sell funding or new capital upon a shareholder’s death, illness, or disability.
How much cover do I need for my shareholder protection insurance?
The short answer is you and your business partners need enough capital to buy the existing shareholder’s shares. And as businesses grow, their value can naturally go up. This is why reviewing shareholder protection insurance every year is important to ensure it’s still useful.