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Buy / Sell / Key Person Insurance

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Buy/Sell  and Key Person Insurance

If you are involved in a business with a partner or partners then each of you would normally hold an equity stake and the success of the business becomes a collective of each partner’s efforts and work.

Why do I need Buy / Sell or Key Person Insurance?

If you are involved in a business with a partner or partners then each of you would normally hold an equity stake and the success of the business becomes a collective of each partner’s efforts and work. But what would happen if one of the partners unexpectedly dies? Well, unless that partner has bequeathed their share of the business to the remaining partner/s, they may find themselves with the deceased partners spouse / de facto or estate as their new business partner.

How does it work?

Effectively when a buy / sell insurance policy has been effected between business partners and one of them dies, the business is paid the life insurance benefit which is then used to purchase that persons share of the business from the estate giving ownership to the remaining business partners. This, of course, must be bound by contract when the insurance is established and all interested parties can get on with their own interests. Serious discussions need to be held and everyone needs to understand the outcomes of such a transaction. We will assist in these discussions and the whole process, obtain quotes from various life insurers and advice on each individual case accordingly.

What is Key Person Insurance?

Key Person Insurance may sometime be confused with buy / sell insurance and while life insurance is a common link between the two, the reasoning and process is somewhat different. Key person insurance is a life insurance policy taken out by a business / company on a person in that business who may be seen as a driving force, an influence or one who holds a significant role in the business. I life insurance policy is taken out and owned by the company itself and in the event of the key person passing away the policy benefit is claimed by that company and generally used to fund the replacement of a person with similar capabilities, experience and worth.

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We will assist in these discussions and the whole process, obtain quotes from various life insurers and advice on each individual case accordingly.