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You and Your Business
As a business owner, you may
rely on a number of key people for the successful operation of your company.
Many businesses have been built around the strengths and skills of a few
individuals whose capital, energy, knowledge, or
experience make them a valuable asset of the organization.
What would happen should your key person become ill or even worse, pass away?
Would your business suffer from the loss of knowledge, expertise or management
capability of that person?
Key person insurance is a life insurance policy maintained by the company on the
life of an important partner or employee. It provides funds to partially offset
the economic cost to the company of losing such an employee. It may also
provide:
1. A stabilizing factor to keep the business running.
2. Reassurance to creditors to keep channels open.
3. A death benefit to the family of the deceased for a reasonable period of time
to replace lost income.
Protect your Business Interest with
a Buy/Sell Agreement
If you are a partner in a business or a major shareholder in a company, you
should consider drawing up a buy/sell agreement. This type of agreement is
between shareholders or business owners that provides for a smooth transfer of
ownership should a partner become disabled, critically ill, retire or die.
The right combination of life insurance, critical illness and disability
insurance are fundamental parts of buy/sell agreements because they can provide
immediate funds to the surviving partners to buy out the deceased or disabled
partner.
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Benefits of an insured Buy/Sell Agreement: |
- The business' working capital remains untouched.
- The owner's business has a guaranteed market at a fair
price.
- Heirs obtain a definitive value for the deceased partner's
interest.
- Surviving partners obtain total and unrestricted ownership
of the business.
- The business is ensured that the death,
disability or retirement of a business owner will not disrupt daily business
operations.
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