Shareholder protection insurance provides shareholders with monies in the event of death or critical illness of another shareholder. Shareholder insurance is designed to provide a lump sum of money to the remaining shareholders to enable them to purchase the shares from the deceased partner. In most companies, shares will be passed to the husband or wife of the deceased. This insurance allows the company to buy back the shareholding while also giving the wife or husband the monetary value of what the shareholding is worth. Thus both the company are happy as they retain control and the wife/husband is financially better off.
What we do
- Whole of market research in to all the companies that offer underwriting for shareholder insurance. This means you get the best deal!
- Set up of each application for each individual shareholder. In most cases this can be done over the phone.
- Free Shareholder Agreement advice and help to set the up (We provide the agreements for you for free)
- We are experts in the market having set up many shareholder protection policies in the past we know what we are doing
What Does It Cover?
Shareholder protection insurance will cover death or critical illness of each shareholder and provide a lump sum of money to the shareholders.
What Option Agreements do we use?
In the event of death the cross option agreement will allow both parties (the remaining shareholder or the deceased beneficiary) to trigger the agreement and use the money to purchase the shares from the deceased beneficiary. If the policy includes critical illness you may choose to opt for a single option agreement. This only allows the person with the critical illness(life assured) or the remaining shareholders to trigger the agreement but does not give the option to both. The option will be decided on the out set. Please click here for an Shareholders-Cross-Option-Agreement-10-10
What happens if there is a claim?
If a shareholder dies or suffers a critical illness (that hits one of the definitions) then there remaining shareholder would need to place a claim with the provider. If the claim is successful the lump sum of money will be paid to the company or directly to the shareholders (depending on how it was set up). Money is then paid out as per the option agreement.
Do we need shareholder protection?
If you are one of a number of shareholders then you should look at protecting your shares. Think about what would actually happen if your company lost a major shareholder. Would you be able to buy those shares back from the deceased beneficiary at a price they think reasonable?
Successful businesses will often have shareholders who may or may not be actively involved within the day to day running of the company. But if someone is investing money within the company or buying shares they will often want to know that the investment is safe. Having shareholder protection insurance with a shareholder agreement is the best way of doing this.
Examples of shareholder protection and why you may need it
For example two people in a company will often own 50/50 split. If one of the people die the other is now left with the running of the company. Key man insurance will help inject money to help the day to day running and of course this is very important. But you now may be left with someone else owning 50% of your company. That person could of course be the wife or husband of the deceased. They may of course want to sell their half of the company. What if they sell out to someone you do not get on with. This can have massive complications to your business.
A shareholder protection policy will allow each shareholder to receive a lump sum of money if another shareholder dies. This money can then be used to buy they shares from the new owner. The wife or husband is financially rewarded for the shares and the remaining partner is now a 100% shareholder. Along with the insurance there are shareholder agreements such as a cross option agreement or a double option agreement. Partnership agreements can be slightly different.
For more information on how these are set up and for any quotes please fill in the form and someone will be in touch soon.