If you’re a business owner, or a major shareholder, you should consider getting shareholder protection insurance in, to help manage what happens to shares once someone dies. It’s a business point not many consider, but lack of planning can be detrimental to a business.
What Is It?
Currently, more than half of businesses in the UK have no formal shareholder agreement, meaning that if a business owner of shareholder dies, the company goes into turmoil. Think of shareholder protection insurance almost like life insurance for your business. It will pay out a lump sum if a shareholder dies, or suffers critical illness.
This money goes towards the surviving shareholders, to allow them to purchase back the shares from the deceased. This ensures that the company doesn’t fall into the hands of an external party that could damage the company.
What Can It Cover?
As mentioned, it will cover death of a shareholder and critical illness. This covers terminal illnesses, where a doctor will diagnose them with less than 12 months to live. Critical illnesses such as cancer, heart attacks and strokes are the three most common claims.
Truthfully, it can cover over one hundred different illnesses and diseases, including permanent loss of vision, Parkinson’s, loss of limbs and motor neuron diseases. This broad group of illnesses ensures that you are getting coverage that will complete cover all situations and factors to help protect the business.
How To Get The Best Deal?
In order for you to get the best deal regarding shareholder protection, you should ensure you are checking every provider. This is not only to ensure you get the best price you personally can, but so that the interests of your business, shareholders and clients is protected.
The policies can be complex, meaning you may not fully understand what you’re reading. That’s why you should use companies such as Drewberry who compare shareholder protection insurance from leading providers to find you the best coverage possible. They can provide you with a quote instantly, and let you to read reviews from clients to ensure you’re getting a good service. Speaking with advisors makes the application process quicker and easier, allowing you to focus on the business.
Why You Need To Protect The Business?
It’s important that you look into shareholder protection insurance, as without it, you risk losing shares to family members when it passes into estate. This means you could have your family, or a shareholder, interfering in business matters when you had no intention of letting them do so.
In most cases, family members will sell the shares for the best price they can to anyone, if they have no interest in the business, which is a problem. This leads to a loss of control within the leadership and hierarchy, where non-business-related people without the skills try to run the company.
You could also run the risk of gaining a sleeping partner, which means an external family member becomes a major shareholder, but does nothing to help run the company. This is not only detrimental to the success of the business, but they are actually entitled to a large share of the profits because of their status.