Shareholder Protection Insurance

Article published on 24th July 2015

shareholder protection insurance glasses

When it comes to matters of business and fate, things can sometimes easily get out of hand.

Such is the case when a director or business partner unfortunately dies and the shares are passed on to someone with little to no interest in the company.

While these scenarios seem better suited for a movie, they are more common in the real world than one would like to think.

Without proper planning and considering all potential scenarios, the risk of losing the company to the wrong person can become very likely.

Thankfully, a solution is available to protect you and your business via a shareholder protection policy.

Taken out on the relevant shareholder, this type of protection policy has the power to ensure that the surviving business owners have the proper rights over the business and are able to afford to purchase the deceased's share of the business from his or her estate.

A great thing about this kind of business protection is the fact that it guarantees that difficult questions will be avoided and the beneficiaries of the deceased's estate can easily be shown the value of their share of the business.

A shareholder protection insurance policy mainly covers two situations: death and critical illness.

In case of a shareholder dying, the plan would payout a lump-sum to the other shareholders.

Regarding illness, the protection policy would allow the plan to payout if the shareholder were to suffer a serious illness such as a heart attack or stroke.

This type of protection is easy to set up and the premiums are paid for by the business itself (as it is the business that this will benefit overall) for each individual shareholder, who is to be protected.

Since the policies are usually set up in trust, the proceeds will not form part of the deceased's estate and as a consequence, will not be subjected to any inheritance tax liability.

However, just like any other financial product, it is important to consult with an expert in order to ensure your position in regards to any potential tax liability.

Shareholder protection policies are usually set up in trust for the benefit of the other shareholders. When this is the case, the rest of the shareholders are appointed as trustees. Therefore, in the event of a claim, the partners would have the money to buy the deceased or ill shareholder out of the company.

All things considered, shareholder protection policies are designed to ensure that your business survives and can continue to operate when faced with the upheaval that the death of a shareholder can bring.

So ask yourself a question.. how would your business cope with the sudden death or illness of a major shareholder?

Are you ready to discuss your business protection with our trained advisors? Speak to us today on 0808 1782 777 to get your shareholders protected quickly and easily with a Shareholder Protection Policy.

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