First of all, it is important to understand who needs partnership insurance and who doesn’t. If the owner of a business is an individual/sole owner, it is crystal clear that they don’t need this insurance since they don’t have partners in ownership of the company. It is for those who run a business with one or more partners that this insurance matters and should look into it. Sole business owners don’t need partnership insurance since they don’t have a partnership to protect.
Partnership protection insurance plans are very important for business run by two or more partners because this insurance plan provides safety measures to the partners in case of a serious illness to one of the partners or if he/she becomes permanently disabled or in cases of untimely demise.
In case of an unfortunate death of one of the partners, the partnership protection insurance allows the rest of the partners to buy the shares of the deceased partners from the next of kin whomever inherits it. Although if one of the partners is bed ridden due to serious illness or permanently disabled, the insurance policy allows the other partners to purchase the shares from the partner himself.
What are the key things to consider?
Partnership protection insurance is one of those policies that requires you to consider things that are not at all pleasant. Having to consider the possibility of critical illness, permanent disablement or death befalling you or your partner/s is particularly confronting. However, having a plan in place should something like that happen is all part of being a responsible business owner.
- If one of the business partners would become critically ill, permanently disable or even die due to unfortunate circumstances, is there scope for the business to survive?
- In case of an untimely demise of one of the partners, who gets the right to inherit the deceased partner’s share, his/her family or the rest of the partners?
- It is important to think and analyse the future possibilities of how comfortable the rest of the partners will be to work with whoever inherits the deceased partner’s shares. And more importantly would be happy with him/her being a new partner in the business?
- If one of the partners had to face unfortunate circumstances in life, will his/her family be able to make a living on their own?
- If something were to happen to one of the partners, would the company and the partners be able to buy him/her out?
How to determine if you need partnership insurance or not?
The process of concluding whether you need partnership insurance or not is quite similar to the process of other insurance policies. To begin with, you need to weigh the advantages and disadvantages of the policy and relate it to your current situation. If the insurance provider has impressed you with added protection advantages and benefits, it means it is time to take it to your partners and discuss whether the company needs it or not. It is mandatory to keep in mind your financial situation as individuals and also the economic viability of the company if it has to go through an unexpected incident. If you still are not sure about getting a partnership protection insurance, get the advice of a financial advisor.
Taru Financial Services will be glad to guide you through the pros and cons of partnership insurance and evaluate the best policy for you depending on your personalised situation.
Who should get partnership insurance and what are the benefits?
Partnership insurance is generally important for businesses with multiple owners. There are many benefits that come along with this insurance that helps with the smooth functioning of the business.
- Provides life cover to a partner in case he becomes sick or passes away
- Helps the partners of the company with financial aid to repay for the deceased partner’s dues
- Keeps the deceased partner’s family or successor away from the business, thus giving the rest of the partners the freedom to decide the next course of action