Shareholder protection

We’re with you every step of the way

Protection for the business

What is shareholder protection insurance?

Shareholder protection cover is a business protection insurance that provides shareholders with the necessary funds to buy shares from each other if one of them was to die or was unable to work due to a serious illness or accident. Should a shareholder die then often the family will inherit their shares in the company, this can cause concern and issues for the remaining shareholders.

The most common policies are just life insurance-based however critical illness cover can be included as an option.

How does it work?

The sum insured is usually based on the amount of capital the remaining partners would need to purchase out their outgoing colleague’s equity in the company. The premium cost to the business depends on the level of risk the insurer thinks they are taking on by providing the cover. This is calculated based on the insured person’s age, lifestyle and whether they have any pre-existing health conditions.

For example, shareholder protection for somebody in their 30s with a clean bill of health who doesn’t smoke would likely cost a business less in premiums than the same policy for somebody in their 60s who smokes and has a history of high blood pressure.

Adding critical illness cover will increase the premiums.

Shareholder protection policies pay out a lump sum upon the death of the insured person, if they’re diagnosed with a terminal illness and given 12 months to live, or contract a critical illness or injury (that’s covered by the policy) and are forced to leave work as a result.

 

Benefits

The main reason to take out shareholder protection insurance is because it can help a business out during a difficult time such as the loss of a fellow shareholder through death or illness. This level of uncertainty can throw a company into unforeseen challenges.

The main reason to take out shareholder protection insurance is because it can help a business out during a difficult time such as the loss of a fellow shareholder through death or illness. This level of uncertainty can throw a company into unforeseen challenges.

Some of the main reasons it should be considered:
• If a shareholder dies without a policy in place their stake in the business could be inherited by an unwelcome beneficiary or end up being sold to a rival
• Businesses don’t need to save up capital or dip into their savings for funds to purchase an outgoing shareholder’s stake in the firm
• Having a policy in place can help ensure a smooth transition when shares are changing hands. This can help keep business disruption to a minimum
• The insured person’s beneficiaries have clarity over the amount they will receive for the company shares when they are bought out by the other shareholders
• For small businesses, shareholder protection can be vital since many smaller firms might struggle to raise buy-out capital at short notice.

 

For more information around how shareholder protection provides your business with  the protection you need. Please contact us 01423 561060 or email; info@sj-fs.c