Why every business needs a safety net

Why share protection is important

You insure your house, you insure the cat and the dog, you may even insure your health, but what about your business? What happens if an owner or part-owner of a company dies unexpectedly?

Every business needs a safety net. After all, it represents not only the livelihood of you and your family, but also that of your employees and fellow stakeholders.

Ever heard of share holder protection? Even though it’s widely used throughout the business world, not everyone has an understanding of what it is, how it works and what the benefits are.

Director share protection is a type of life insurance policy (with optional critical illness cover) taken out to make sure that in the event of a partner/shareholder developing a critical illness (if you choose this option) or passing away, remaining shareholders have the financial means to purchase their share/s and ensure the business continues to run smoothly.

Why is it important?

Imagine, for a moment, what would happen if one of your company’s shareholders was to develop a critical illness or die. Would your company’s shareholders have the financial capital to purchase this director’s share of the business outright, or would there be a risk of shares being inherited by descendants with little or no interest in or knowledge of the business – and potentially being sold off to competitors?

Director share protection provides a lump sum in the event of a shareholder’s critical illness (if opted for) or death, allowing remaining others to buy their shares without the stress of having to find the necessary funds.

It’s crucial for business planning. Share protection policies ensure the control of the company remains in the right hands and business can continue to run smoothly and effectively. It’s all too easy to just think about the here and now and the day to day running of the business but it is also vital to look ahead.

Figures released by the Association of British Insurers (ABI) and Group Risk Development (GRiD) show that the insurance industry paid out a record £5 billion in protection claims in 2017 – representing an increase of more than £340 million year-on-year. Figures from leading insurers show that cancer tops both life claims pay-outs and terminal illness claims.

As well as supporting fellow shareholders and family members in the case of death, shareholder protection insurance can also be used to cover serious illnesses. If the right agreements and policies have been put in place, a sick shareholder is able to sell shares to continuing shareholders.

This is not a search, click and buy policy. Cosgrove Brown’s experienced team of advisors has been assisting many business owners protect their companies and their employees against the risks posed by unexpected critical illness and death. Relevant life cover for staff, power of attorney agreements for business owners and share protection insurance are some of the choices available.

Don’t let your business fall in to the abyss. Find out how we can help you protect your business by calling us today.