Co Director and Partnership cover has the same essential function. This is to allow the remaining Directors or Partners of a company to buy out the deceased Director’s or Partner’s share of the company from the next of kin with the proceeds of an insurance policy that was in force on the Director’s/Partner’s life.
This is hugely important as it means that the company does not have to withdraw money from the company or take out a loan to buy the deceased Director’s/Partner’s share. It also provides for the Director’s/Partner’s next of kin and avoids any potential legal proceedings.
Ownership protection can provide the continuing owners, with sufficient cash for the transfer of the outgoing owner’s equity to the continuing owners, if a business owner dies, is disabled or suffers a critical illness.
Concerns for the business owner:
- Joint and several liability for all of the business debts.
- Business creditors can claim against the partner’s personal assets.
- Cash flow is usually dependent on the skills and expertise of the partners or key employees. Salary for personal needs and money to pay business expenses relies on the ability of the partners or key employees to work and generate revenue.
- Finding money to buy out a partner if they die or depart the business due to severe illness/injury.