Business Partner Insurance
Business partners are exposed to the risk of loss of life, permanent total incapacity for work and diagnosis with critical illnesses. In cases like that, the business will find itself faced with a series of operating problems. There is, however, a suitable form of cover that can be activated in such cases, that allows the business to continue operating.
The most characteristic categories of insurance here are:
Often businesses have executives who work in key posts without necessarily holding a stake in the company. In many cases they are considered to be one of that company’s most important assets, hence the term “key men”.
Depending on the company’s size and activities, the “key man” could be the CEO, Financial Manager, Sales Manager, HR Manager or any person holding a vitally important post for the continued operation of the business. Where the “key man’s” post falls vacant due to loss of life or permanent total incapacity for work, the business will need to replace that executive with an equivalent one; equivalent in terms of abilities to get the job done. Such individuals may come from labour market or, as is often the case, from within the business itself.
It takes time to search for, replace and train the new executive. During that time it will be hard -even impossible- for the business to function well and productively. The absence of the “key man” -even temporarily- entails lost profits. By insuring “key men” against these risks, the company as beneficiary of the contract has access to the capital needed to covers all or part of the lost profits.
Where one of the partners in a business passes away early, life insurance can allow the other partner (or partners) to acquire the deceased’s stake in the company from the heirs and to continue business without interruption with full control over the business. This means none of the partners will be faced with the possibility of suddenly needing to find a large chunk of capital to purchase the deceased partner’s shares from the heirs in order to allow the business to continue to operate.
In most cases, share purchase insurance is accompanied by a Shareholders’ Agreement which is triggered when the insurance policy is triggered.
Even if, as a businessperson, you have ensured that capital will be available if one of the risks described above occurs, you still need to bear in mind that it takes time to get the business back to running as normal. In most cases a considerable amount of time is required to replace an executive, find a buyer, or sell shares. During that time the company is very likely to be under-performing, which entails lost profits. It is therefore important to consider that additional capital will be needed to cover the consequential losses that arise after such risks occur and to take steps to secure those funds.
Most small to medium-sized enterprises in Greece tend to be family-run businesses. The assets of those enterprises typically don’t report the owner’s value; and owners play multi-dimensional roles in such businesses. They work as employees but at the same time also manage the business and assume all responsibilities.
If unable to perform their duties due to critical illness or permanent total disability or loss of life, their family must take up those duties themselves to avoid the unwanted situation of having to shut the business.
However, in most cases the affected owner’s spouse or children are not in a position to do that, meaning the business is forced to close. That has the added knock-on effect that the family loses the income generated by the business. Private insurance can offer a life-saving solution, providing the family with adequate capital so that if any of the above risks occurs, they can hire one or two people to take over running the business.
In addition, such insurance is also useful to the heirs of the deceased owner. It puts them in a position to pay any debts the business has to suppliers, employees, and the state without being personally burdened by them or finding themselves in the even more unpleasant position of having to borrow money.