Protecting Your Business

One of the biggest risks your business must consider is the illness, injury or death of someone who is key to its success.

In our experience, without appropriate insurance and buy/sell agreements in place, the cost of losing a business partner or key employee to illness, injury or death can lead to the closure of your business. Key person insurance is like having life insurance on the key people in your business. It protects your business from loss in revenue, profits and capital value should they suffer a major illness, injury or death.

A key person is anyone whose knowledge, work or contribution is crucial to your business. In your business this may be the owner, a partner, or a particularly successful salesperson.

A buy/sell agreement is like a “business will”. It is an agreement relating to the transfer of the departing owner’s interest in the business to surviving owners should he or she suffer a major illness, injury or death. It also outlines how the departing owner is compensated for surrendering their interest. Insurance policies are a common way to fund a buy/sell agreement.

For example, if a partner in your firm were to pass away, the remaining partners would usually buy the shares in the firm from the deceased partner’s family. Having the correct buy/sell agreement minimises any negative impact on the business.

Does your business have an appropriate buy/sell agreement in place? And how do you determine who needs key person insurance? Ensure the survival and longevity of your business and talk to a Sherrin Partners’ adviser today.