Business Insurance

Planning for the loss or disability of a business owner or partner with a buy sell agreement and insurance is crucial to ensuring the continuity of your business and protecting the financial interests of each co-owner’s family.

A buy sell agreement specifies what will happen to the interests of an owner, partner or shareholder who passes away or becomes disabled. If your company’s buy sell agreement requires that the other owners or partners must purchase the deceased/disabled owner’s interests, you can use life or disability insurance to fund the buy sell agreement rather than personal funds or business assets.

In many cases, the simplest option is to purchase a life or disability insurance policy on each co-owner or partner. In this way, funds could be available to complete a buyout and provide the families of each partner or co-owner a secure source of funds for the value of their interest.

Alternatively, the business can purchase insurance on each co-owner or partner and use the insurance proceeds to purchase or redeem the deceased or disabled owner’s interest in the business.

If your business employs someone whose contribution is vital to your company’s survival, consider making key-man (person) insurance part of your business continuity and succession plan—especially if you’re a small business owner.

Should a key member of your team pass away or become disabled, your bottom line may suffer in the short-term, and over the long-term, you may have to find a replacement or even shut down your business. However, with the benefits payable from a key-man (person) life or disability insurance plan, you could:

• Recruit, hire and train a replacement
• Pay off debt and deal with creditors
• Alleviate lenders’ concerns about your company’s financial health
• Reassure customers, employees and investors that the business will continue operating

What’s more, if you and your family rely on your business as a primary source of income, key-man (person) insurance can help ensure that the business will continue to provide a secure financial future.

When illness or disability prevents someone from working, loss of income can quickly become a serious problem. Not only is one faced with reduced cashflow, but expenses go up as there are often additional costs associated with being sick or disabled.

The average length of a disability that lasts over 90 days is 9 years

A Disability Top-up consists of combining your current group disability insurance with additional coverage from an individual plan.

This concept works best in situations where the maximum benefit available under your group long-term disability plan is low in relation to your current income.

A Top-up plan helps to ensure that your income is replaced in the event of disability.

In addition, a Salary Continuation Plan (SCP) is a method of “grouping” individual disability insurance policies which can provide an attractive, cost-effective benefit for employees of a corporation or a non-corporate entity – while taking advantage of beneficial tax treatment allowed by the Canada Revenue Agency (CRA).