Insurance forms a vital part of your short , medium and long term financial plans and can provide you, your business and your family(s) with financial stability and peace of mind against a number of unforeseen events.

Key Person Protection

Protection for the business to cover Revenue and/or Capital Costs (e.g. debt) in the event of the loss of a key individual(s) in the business.

Buy/Sell (Succession) Protection

When combined with a formal Buy Sell Agreement, this protection can provide the opportunity and funding for the purchasing and re-assigning of shares within the business in order for the remaining shareholders/owners to maintain control.

Business Expenses Protection

In the event of Illness or Injury preventing a business owner and/or partner from working this cover can provide a monthly payment to cover the ‘fixed’ ongoing costs of the business for a set period of time.


Key Person Protection

  • Key people may include:
  • Managing directors
  • Computer programmers
  • Specialist engineers
  • Working directors
  • Sales managers
  • Guarantors

This cover can also be utilised in the event of the Death, Total & Permanent Disablement or Critical Illness of a Key Person within the business (e.g. business owner, key employee).

In the event of a claim the proceeds can be used to:

  • Replace lost revenue/profits
  • Used to assist with replacement costs of the Key Person (e.g. recruiting costs, training costs, temporary replacement costs, one off enticement fee costs).

In the event of the Death, Total & Permanent Disablement or Critical Illness of a Key Person within the business (e.g. business owner, key employee), this cover can provide a payment to help minimise a financial impact.

In the event of a claim the proceeds can be used to:

  • Eliminate or reduce debt (loans, leases, overdrafts etc), to Banks, Equity partners and provide the opportunity for the release of guarantees
  • Assist with replacing loss of goodwill

Some key areas that require consideration when implementing Key Person Protection are Policy Ownership and Premium Payments, as these will determine the need to consider:

  • Capital Gains Tax (CGT)
  • Fringe Benefits Tax (FBT)
  • Tax deductibility of premiums
  • Other tax on the proceeds (e.g. income tax)

It is important to implement initial documentation and maintain ongoing records regarding the purpose of the polices that are in place for Key Person Protection. In the event of a claim it is important that these have been maintained and kept in order, as the ATO may assess the proceeds of a claim in a manner not in line with the original purpose of the cover.

Due to the different tax treatments of the premiums and also the proceeds of ‘Capital’ and ‘Revenue’ Key Person Protection it is important to have appropriate documentation in place.


Buy / Sell (Succession / Ownership) Protection

In the event of the Death, Disablement and in some cases the Critical Illness of a shareholder and/or partner within the business, this cover assists with ensuring the continuation of the business in line with the current shareholders/partners wishes.
This cover, when combined with a formal Buy Sell Agreement, provides either full or partial funding and a pre-determined process (and method of valuation) for the remaining shareholders/partners to purchase the departing shareholder/partner’s share of the business.

A Buy Sell Agreement is a legal document that is constructed following a consultation with a solicitor.

Your Buy Sell Agreement may contain:

  • Your agreed valuation of the business and how this valuation was calculated
  • Details of the ownership of the policy(s) and also details of how the proceeds are to be distributed
  • The circumstances around the distribution of proceeds and also the transfer of the shares of the affected shareholder

The Buy Sell Agreement will cover more than merely the details around the Buy Sell Insurance. It is more than this and acts not just as a Will for your business but also as a formal exit strategy document which all parties should be in agreement with.

Some key areas that require consideration when formulating a Business Succession Plan are Policy Ownership and Premium Payments, as this will determine the need to consider:

  • Capital Gains Tax (CGT)
  • Fringe Benefits Tax (FBT)

What are the options in the event of the death or permanent disablement of a shareholder:

  • Heirs of the deceased could take control of the deceased’s share
  • Heirs of the deceased could sell to an ‘outsider’
  • Remaining partners or shareholders could sell their interest to heirs of the deceased
  • Remaining partners or shareholders could buy the deceased’s interest from heirs of the deceased

Business Expenses

In the event of Illness or Injury preventing a business owner and/or partner from working this cover will provide a monthly payment to cover the ‘fixed’ ongoing costs of the business for a set period of time.

Eligible expenses may include:

  • Rent
  • Leases – equipment, cars, machinery
  • Rates
  • Utilities – electricity, phones, water, etc
  • Salaries – non-income producing employees
  • Others – accounting costs, advertising, insurance
Close Menu