Life Insurance

Corporate Life insurance

• Business Succession Planning
• The Buy Sell Agreement
• Keyman Insurance
• Business Expenses Insurance
• Group Policy

Business Succession Planning

The truth of the matter is that all business relationships will inevitably come to an end. The question is when, and in what circumstances.

When 2 or more people are in business, it’s critical they plan for the possibility of an ‘involuntary exit’ from the business by one of the partners. Whether it’s caused by a death, total and permanent Disablement or a critical illness, there can be devastating consequences not only for them and their family, but also for the remaining partners.

With this in mind, our job is to help business owners put in place insurances to fund the possible departure via a Buy Sell Agreement.

The Buy Sell Agreement

Buy Sell Agreement - sometimes referred to as a "Business Will" - is a contract between business partners that sets out exactly what the rights and obligations of each partner are in the event of voluntary departure of a partner.

Without a formal Buy Sell Agreement in place to dictate the terms under which business assets are handled in the event of a death or serious incapacity, plus sufficient insurance to fund the settlement, scenarios like the following are heart-breakingly common:

• Surviving proprietors have to negotiate with the spouse or other beneficiaries to buy out their share of the business. Funds may not be available, the value of the business may be under contention, and beneficiaries may be forced to take whatever is on offer. Surviving proprietors may argue for example, that the value of the business is diminished without the contribution of the partner that has departed.
• The beneficiaries may choose instead to take an active role in the business - whether or not they truly want to, are qualified to, or more importantly whether the other proprietors want them to be involved. This can happen with possible devastating consequences for the business itself. Whatever the situation, it is potentially fraught with emotion, cost and dangerous distractions from running the business - and can leave everyone involved unhappy with the ultimate outcome.

Please contact Shauna Nguyen at our office to discuss the issues involved in setting an agreement up and how we can achieve a positive outcome for all business partners and their involved families.

Keyman Insurance

Purpose of Key Person cover

Key Person Cover - Insurance which provides protection to a business in the event that a key person is exposed to a Life Risk which results in significant or permanent absence from the business.

What constitutes a Key Person?

• Specialised skills critical to the business
• Staff who have a significant client base, clients who may leave the business in the absence of the Key Person.
• Contribute directly to revenue and profit.

Why Should Businesses Insure Key People

Removal of a Key Person in a business will cause a reduction in revenue which flows onto reduced profits and cash flow. This may lead to the business not being able to meet short term liabilities.

Other key reasons why key person cover is important for a business include:

• Increased expenses, due to cost of attracting and training a new employee
• Contracts may be jeopardized
• Assurance may be lost with creditors, customers and shareholders
• Business may be left with a skill and knowledge gap due to removal of a key person

Business Expense Insurance

What is Business Expense Cover?

A successful business plan considers contingencies and is prepared for the unexpected. A successful business plan includes Business Expense Cover. Business Expense Cover will pay a monthly benefit to assist with the day to day running expenses of the life insured’s business if they are totally or partially disabled and unable to work. This will help with salaries, rent or mortgage payments, amenities bill and many other allowable business expenses.

Business Expense Cover details

Business expense cover is generally available to people who are self-employed and who work a minimum of 30 hours per week in their principal occupation. In considering whether to provide cover, the life insured’s type of occupation and employment status is taken into account.

Group Policy

Group Salary Continuance

Enables an employer to continue to pay an employee who is suffering a disability beyond their sick leave entitlements. Certain numbers of members are required to qualify for this benefit.

Group Life Insurance

Provides a benefit on the death of an employee. Can include Total and Permanent Disablement (TPD). Certain numbers of members are required to qualify for this benefit.

More Information

Shauna Nguyen
Financial Adviser
Authorised Representative

Phone: 03 8544 1600
Email : life@fitzpatrick.com.au