Business protection is all about insuring for the unexpected. It’s a way of protecting your business if something goes wrong. It can provide an essential safety net for all types of business.
One of the great risks of a business partnership is that one of your colleagues may die, with his or her share of the business passing to someone else. The safety net is a pre-arranged scheme to ensure the surviving partners have enough funds to buy out the interest in the business, or compensate the deceased’s dependents.
In the interests of financial security, business stability and continuity – particularly for private limited companies where there may only be a small number of principal shareholders – it is essential to provide a safety net following the loss of a shareholder.
Key person insurance, also formerly called key man insurance, is an important form of business insurance. There is no legal definition for ‘key person insurance’. In general, it can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of the member of the business specified on the policy.