Term Assurance and Whole of Life Policies

Knowing about Term Assurance

Term Assurance is a simple life insurance policy which covers an individual during a set period of time called the “term”. Should the insured person passes away within this period, the policy provides a lump sum payment to the nominated beneficiaries. In a business scenario, this payout is often designed to be paid to the surviving owners or to the business itself, with the funds needed to buy out the deceased owners shares and the proceeds going to his or her estate.

This structure has a number of benefits:

• First, it guarantees that the family of the deceased is fairly compensated in terms of their share of the business, preventing any possible wrangles or selling the shares forcefully to external individuals.
• Second, it provides the other owners with the opportunity to stay in control of the business ensuring business continuity and stability.

Term Assurance policies can be suiting to the needs of the business, i.e. covering the period to coincide with the anticipated life of a partnership agreement or a vital business loan.

Knowing about Whole of Life

Whole of Life Assurance, as the name suggests, provides coverage for the entire lifetime of the insured individual, rather than for a fixed term. As long as premiums are paid, the policy will pay out a lump sum upon the death of the insured, regardless of when it occurs. This makes Whole of Life policies particularly suitable for long-term business arrangements where it is important to guarantee a payout at some point in the future.

For business owners, Whole of Life Assurance offers the peace of mind that funds will always be available to facilitate the purchase of a deceased partner’s share, no matter when the event occurs. This is especially valuable in businesses where ownership is expected to be held for an indefinite period or where the succession plan is not tied to a specific timeline.

By providing a guaranteed payout, Whole of Life policies remove uncertainty and ensure that surviving partners are never left scrambling to raise funds at a critical moment.

How These Policies Facilitate Business Succession

Both Term Assurance and Whole of Life policies are typically used in conjunction with a well-drafted shareholder or partnership agreement. This agreement outlines what should happen to an owner’s share in the event of death, and the life assurance policy provides the financial means to carry out those wishes.

To illustrate, in the event that one of the partners dies, the policy is paid as a lump sum to the surviving owners who in turn use the funds to purchase the deceased portion of the estate. This will protect the deceased family by giving them a fair compensation and still leave the remaining partners with the full control of the business. The lack of such policies can push the business to borrow money, liquidate its assets, or worst still, invite an unwanted third party as a new co-owner, which ultimately compromise the future of the firm.

Why Many Businesses Overlook These Options

Despite the clear benefits, many businesses fail to implement Term Assurance or Whole of Life policies. Often, this is due to a lack of awareness or understanding of how these products work and the crucial role they play in business succession planning.

The problem is that some business owners can be misguided into thinking that only huge corporations need such protection or that it is not worth the price. But the truth is, these policies are affordable, they are flexible and they can be designed to fit any size of business.

Summary

Term Assurance and Whole of Life policies are vital tools for any business with multiple owners. They do this by giving an assured lump sum upon the passing of one of the partners, which ensures that a smooth ownership transition occurs, families are adequately compensated and the business is stabilised and in the hands of the surviving partners.

Introducing such policies along with a well-developed shareholder or partnership agreement is a preventative measure that any company can take to secure its future and the interests of all parties concerned.

Secure Your Business with Term Assurance & Whole of Life Policies

For businesses with multiple owners, Term Assurance and Whole of Life policies are essential tools for protecting continuity and stability. These policies provide a guaranteed lump sum in the event of a partner’s death, ensuring a smooth transition of ownership, fair compensation for families, and financial security for the remaining partners.

At Howard Wright, we’ll help you implement the right protection alongside a robust shareholder or partnership agreement, so your business is always prepared for the unexpected. Call us on 0345 688 4939, complete our Smart Enquiry Form. Get expert advice today and safeguard the future of your business and its people.

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