Shareholder protection provides cover in case a business owner becomes permanently disabled or dies.
Each shareholder is insured for the value of their shares in the business. In the event of death or disability there is money available for the other shareholders to buy out the shares required.
What Does shareholder protection Insurance Cover?
In the event of either death or permanent disability of a shareholder, this covers the other shareholders to be able to buy out the remaining shares without financial burden to themselves.
Having a buy-sell agreement in place is just as important as shareholder protection insurance. This is a legally binding agreement between co-owners of a business that governs the situation if a shareholder becomes disabled or dies. It is important to keep this contract up to date as the business evolves.
Who Is It For?
If there is more than one shareholder in a business with a financial value, then shareholder protection is worthwhile considering.
Why Take Out shareholder protection Insurance?
If something happens to a shareholder, the estate of the deceased shareholder is entitled to claim their value of the shares. Without this cover in place the surviving shareholders would have to fund this themselves. If the share payout isn’t viable it may mean the deceased persons partner or beneficiaries could join the business as a shareholder, regardless of ability or experience. This would give you no option of who you work with and could be potentially damaging to your business.
General Benefits
No need to raise funds
In the case of death or permanent disability of a shareholder this cover will pay out the value of the shares to the remaining shareholders so they can buy out the exiting shareholder.
control who you are in business with
This insurance alongside a buy-sell agreement ensures that remaining shareholders can operate the business rather than having someone else coming into the business if a share payout isn’t viable.