Business Partnership Protection Insurance
If you’re in a professional partnership, you may have wondered how you’d keep the business running and retain control if one of your fellow partners was to pass away or suddenly leave due to illness or injury. This is where partnership protection insurance can help.
To help you understand how this type of business protection works and how to get the best deals, we’ve put together this concise guide.
It covers the following topics…
What is partnership protection insurance?
Partnership protection insurance isn’t really a product in its own right, but it’s a term that’s often used when business protection products are offered to a partnership on a bespoke basis. This may include life insurance policies, critical illness cover or a more comprehensive key person plan that includes both life and critical illness insurance.
The idea behind this type of protection is to provide the remaining partners with enough capital to retain control of the business and buy out their outgoing colleague’s interest.
To secure this level of protection, some partners take out a life-based key person insurance plan and write it into trust for the other partners. It is also possible to include critical illness cover in these policies for broader protection against certain serious health conditions.
How does it payout and how much do I need?
This type of partnership protection insurance would usually pay out a lump sum to the remaining partners (via the trustees) if the insured person passes away, is diagnosed with a terminal illness or leaves work as a result of an illness that’s included in the plan.
The amount of insurance you take out should depend on the requirements of the business, specifically how much capital you would need to buy out a partner should the worst happen.
Whether you should protect your partnership with a life-based plan or opt for broader coverage will depend on business requirements and how much you’re willing to pay in premiums – plans with critical illness included can be significantly more expensive.
If you’re unsure which partnership protection insurance solution is right for you, get in touch. The business protection experts we work with can outline all the available options and help you choose a policy tailored to your specific requirements.
Why do I need it?
Partnership protection insurance is important because there are many financial implications to consider if your business was to lose a co-partner unexpectedly. It’s vital to make sure that there would be funds available to buy out the deceased partner’s share of the business.
Losing a partner with no protection insurance in place could mean having to sell assets to raise capital to buy them out. Another risk is that, if you’re unable to purchase it, the outgoing partner’s share could fall into the hands of an uninterested or hostile inheritor.
Furthermore, having a lump sum payment to nip this problem in the bud with minimal disruption to the businesses can help surviving partners retain the confidence of their staff.
If you trade as a partnership, most experts will recommend having some form of protection insurance in place for these reasons and more. Make an enquiry if you’d like to discuss any of this in more detail with an insurance expert who specialises in partnership agreements.
How to compare partnership protection insurance quotes
The best way to do this is to contact a whole-of-market broker to make sure you have access to every partnership protection insurance deal available. If you go to an insurance provider directly, you will only have access to their products, and online rates tables are only useful for a general overview since they aren’t bespoke to your business.
The quote you’re offered will be based on how much coverage you need, as well as the age, health and lifestyle of the insured partner. The higher the risk the insurer is taking on, the more you’re likely to pay in premiums. A partner in their 30s with no pre-existing health conditions who doesn’t smoke, for example, will be less expensive to insure than somebody in their 60s with a history of heart disease and heavy smoking.
Including critical illness cover in your policy will also drive up the premiums significantly.
If the protection insurance you’re looking for is likely to be classed as a higher risk for any of the reasons we’ve discussed here, it’s doubly important to apply through a broker, as this is the best way to ensure you won’t be overcharged for your premiums.
Some insurers offer more favourable rates to high-risk customers than others, and the advisors we work with will know exactly which provider is best positioned to offer the most competitive rates to your partnership, based on the business’s needs and circumstances.
Make an enquiry and we’ll match you with a partnership protection insurance expert for a free, no-obligation chat about your requirements.
Are there any alternatives to consider?
Yes. If you’re in a business partnership of two people another option would be to take out a personal ‘life-of-another’ policy on the other person. Any claim would be made directly to the surviving partner but be sure to speak to an advisor before choosing this type of cover.
There may be other alternatives to consider depending on how much capital you would actually need in the event of losing a business partner. For instance, you may already have funds set aside to buy out their share of the business but need finance to settle debts they guaranteed. In this scenario, a business loan protection plan might be more viable.
These are just two possible alternatives to a comprehensive partnership protection plan and others could well be available to your business. Make an enquiry and we’ll introduce you to an insurance broker who can layout every option and suggest the best course of action.
Make an enquiry
If you’re seeking protection insurance for your business, it’s always a good idea to speak to an expert first. The advisors we work with can identify the best solution for your needs and make sure you end up with the most favourable deal that fits your requirements.
Call 0808 189 0463 or make an enquiry and we’ll introduce you to a business protection advisor who specialises in partnerships for a free, no-obligation chat today.