Blog

How Does Buy / Sell Insurance Help Your Business?

If you own a business in partnership, there is always the risk of you or your business partner being unable to work due to injury, serious illness or death. Buy / Sell Insurance can be vital to your business succession plan as it may answer the question: “Would I be able to afford to buy out my partner’s share of the business if they passed away or were not able to work in the business?”
HOW DOES BUY / SELL INSURANCE HELP YOUR BUSINESS?

A Buy / Sell Insurance policy can provide a lump sum to be paid out to the remaining owner(s), their spouse or their estate in the event of death or if they are leaving the business due to a serious illness or injury. This can ensure the business can continue to operate (with existing partners) and that their spouse or estate is compensated for their share and rights to the business.

The purchase of the departing owner’s share of the business can then be funded either fully or partially by the proceeds from the buy / sell insurance policy.

Buy / Sell Insurance can help reduce the risk of:

– An owner or their estate commencing legal action over a payout figure, as it will have already been determined by the buy / sell arrangement.

– The departing owner’s estate selling their share of the business to an unsuitable third party;

– Without working in the business, the departing owner’s spouse taking claim over the business profits;

– A departing owner’s spouse deciding (against the wishes of the continuing owners) to act as a partner of the business as opposed to taking the payout;

– The remaining owners having to sell the business in order to pay out the departing owner, spouse or estate.

Different types of ownership structure

You should consider the three types of insurances available – Life insurance, Total and Permanent Disability insurance, and Trauma insurance. After determining the appropriate policies with your financial advisor, you must then decide on the appropriate structure for ownership; these can include:

1. Self-ownership
The person insured is the policy owner. This is a simple structure where the insured is in control of their own policy, even after they leave the business.

2. Cross-ownership
in this situation, business owners take out insurance on each other. The policy can then change with any changes in business ownership.

3. Insurance trust
the trust owns the policies on behalf of all business owners, and the policy ownership is not impacted when business ownership changes.

4. Business entity
the trading entity owns the policies on the business owners’ lives. The business entity can then use the insurance proceeds to buy back the departing owner’s share.

How we can help

It is important to get expert advice from Endorphin Wealth Management regarding business succession planning and as to which policies and structure would best suit you and your business. When carefully considered, Buy / Sell Insurance can be a useful asset which allows you to focus on everyday management and growth of the business rather than worrying about the future should one partner be forced to step down.

For an obligation free discussion, call us on 03 9190 8964, or email us at advice@endorphinwealth.com.au.

HOW DOES BUY / SELL INSURANCE HELP YOUR BUSINESS?

What our Clients Say

  • Robert Rich is a gun and has been a pleasure to work with, he spent a lot of time asking questions and listening to both my husband and I to get a deep understanding of our current financial situation of who we are and where we want to be. His advice has been comprehensive and easy to understand. The genuine interest and enthusiasm he has demonstrated has made the whole experience to date, fun and engaging (it has also been awesome to see some great financial results!). Rob is a great communicator and is always available to chat, meet up or respond to an email. We wish we had seen Rob earlier, and plan to have him as our advisor now and into the future, I have and will continue to recommend him and his services.

    - Ellen Bond

  • Rob has been fantastic helping us set all our financials in order. We didn't want to have to worry about any of this stuff day to day. Rob put together a set and forget strategy that will see us in good shape for the future. Good guy, good advice, great help. Thanks again Rob

    - Andy Wright

  • My husband and I had a wonderful experience with Rob. He is genuine and honest. He has done amazing things with our finances to ensure our future is set up the right way. He has gone above and beyond our expectations. I highly recommend Rob, he is an expert in his field.

    - Anthea Husing

  • love working with Robert. He is highly skilled, practical and empathic. Nothing is a problem and he goes ‘above and beyond’. I have no hesitation in recommending Robert as an excellent financial advisor.

    - Rebecca Carter

  • Robert has managed our finances over the last 12 months as if they were his own. He has an eye for detail and is incredibly enthusiastic. We have recommended him to all our friends & family.

    - A. Miles

  • Rob has handled our finances for some time now. He provided us with sound advice and options. I highly recommend his services.

    - Mathew Quinton

  • Robert Rich provided me excellent financial advice and assistance in finding the right insurance for me. He was incredibly patient, and I'd recommend him without hesitation.

    - Edward Murrell

  • Rob has been helping me with my finances for just over 12 months now and i couldn't be happy, he is a wealth of knowledge and is amazing at what he does.

    - Paul Scott Ray White

  • Phillip and the team provide quality advice. They carefully explain the available options and clearly set the client's interests as the priority.

    - Jon Sutton

  • Rob has provided fantastic advise and clarity to myself and clients

    - James Ruddick

  • Great guys! Amazing financial advice.

    - Jay Boston

  • I cannot say enough about their professional manner and would highly recommend anyone I know to seek their services

    - Heather B

  • Your knowledge of the financial market is up to date and your approach to my portfolio has been proactive

    - Michael S

  • Thanks to Endorphin, I am now on the path to that dream of mine

    - Jake F

  • The plan has definitely made a big difference to my lifestyle

    - Josie W

  • It has been quite exciting and very comforting to have Endorphin looking after my financial future

    - Susan A

  • They provided me with a sense of direction and security that I did not have previously

    - Michelle C