An Insurance Broker & Business Insurance

LIABILITY INSURANCE MADE EASIER BY AN INSURANCE BROKER 

STRUCTURING CONTINGENT LIABILITY INSURANCE

Few entrepreneurs are lucky enough to grow their business into a large enterprise without external funding or incurring debt. Many business owners therefore must sign surety on behalf of their businesses at some point. While this reality is something business owners must live with. It is risky to sign surety without contingent liability insurance. Our Insurance Broker can help you reduce the risk.


At worst, it can place the personal estate of the business owner at the mercy of creditors. Is to leave the remainder of belongings, if anything for his family to inherit. Most surety contracts bind the business owner as a co-principal debtor.

This means that the creditor can choose from whom he wants to claim repayment of the loan. So if one of the co-principal debtors dies, the creditors can claim from their estate. In the winding up of the estate, all creditors must be paid first. This means the business owner’s heirs only receive what is left after all claims and taxes have been paid. So, if there isn’t enough cash in the estate to repay creditors, the business owner’s assets, including his family home, can be sold by the executor.


Call today to get our insurance broker to help mitigate the risk

Having contingent liability cover on the other hand ensures that creditors will be paid from the proceeds of the insurance pay out. This type of cover usually takes the form of an insurance policy with life and disability cover.

It is taken out on the life of the business owner for an amount equal to the debt for which the owner had stood surety. The policy is often ceded to the funding institution for security. Contact our insurance broker today for advise.

THERE ARE TWO WAYS OF STRUCTURING CONTINGENT LIABILITY COVER

It can either be owned by the business itself or by the business owner in his personal capacity. Our recommendation is that the business should own the policy. This is mainly because of complications which may arise if the business owner is the policyholder.


Where the business owner is the policyholder, the policy is paid out to his personal estate. The estate will have to pay the estate duty and then claim it back from the company . Hence this may delay the process of winding up the business owner’s estate.

Contingent Liability cover choosing the correct insurance broker for partners in business

Contingent liability cover and having the correct insurance broker becomes even more important where there are two or more partners in a business. In the event of death or disability of one partner, especially if it is the partner who was more involved in the day-today running of the business, the bank can decide to call in the debt.


Since the business is unlikely to have enough cash lying around to settle the outstanding debt, the bank can claim it from the deceased partner’s estate. This can be done without having to first claim from the business.

Get sound advice from our insurance broker

This also means that the bank can claim the full amount from the deceased estate instead of claiming half of the debt from the other partner. If the deceased business partner does not have enough cash in his estate to repay the company’s debt, the bank has a right to sell his assets including his family home.


When business partners sign surety, they should negotiate with the bank to limit their liability and align it with their proportional share in the business. They should also make sure that they have contingent liability cover even if they have a buy-and-sell agreement in place because the insurance pay out from a buy-and-sell policy may only be sufficient to buy out the deceased or disabled partner from the business, and not enough to cover debts.

It is also important to note that if a business-owner exits the business (etc due to retirement) this does not cancel his or her suretyship. That issue should be addressed with the creditor institution.

SOLE BUSINESS OWNERS

As in the case of a sole business owner, the company owns the policies on both business partners’ lives. The partners will then enter into a contingent liability agreement with the company. Therefore obligating it to repay the bank’s debt in the event of death or disability of one partner from the policy proceeds.

KEY PERSON INSURANCE

PROTECT YOUR BUSINESS AGAINST KEY PERSON LOSS

The most important asset in any business is its people. The ongoing profitability and sustainability and, as a result, the capital value of your business is largely reliant on the input of the key employees in the business. The loss of a key person could therefore pose a great risk to the business, and even lead to eventual ruin.

  • What is key person?


    A key person is someone whose absence through death or disability will have a material effect on the future of the business. If the key person is lost to the business as a result of death or disability, then the business could suffer a direct loss. Whether it’s decreased sales, the high cost of replacing a skilled employee, or the loss of profits or sales while a new replacement is being trained.

  • How it works


    Key person insurance is a simple, cost-effective solution that provides financial security and certainty for your business in the event of the death or disability of a key person. It allows you, as the business owner, to take out a policy on the life of a key person to cover the business against the expensive replacement costs, or to provide cover against a potential loss. The business has the option to insure itself against this risk in a tax-effective manner. Our Insurance broker can help you remove al the risk and set up your business for success


BUY-AND-SELL SOLUTION

Who will be your new business partner when your current partner passes on? When a co-owner in a business dies, the affected owner’s estate can be left severely exposed, but the remaining owners could also face potential problems.

  • The potential challenges created for the deceased owner’s estate:

    • The remaining owners might not have the resources to purchase the shares from the estate.
    • The spouse may not want to participate in the business which means that he/she is left at the mercy of the existing owners.
    • The deceased owner may have had unique skills that he/she brought to the business. Meaning that the risk in the business increases if those skills are no longer available to the business.
    • The deceased owner may have earned a salary in the business, and when he/she dies the spouse cannot simply claim that salary. Unless he/she works in the business on the same basis as the deceased owner.

    The potential challenges created for the remaining owners:


    • The executor of the estate of the deceased owner might interfere in a business about which he/she knows nothing.
    • He/she might want to sell the owner’s interest to the highest bidder, opening the business to unknown external investors; and
    • The existing owners may not have the funding to repurchase the deceased owner’s interest at that stage.

ALTERNATIVE MEASURE

The alternative to insurance through a buy-and-sell arrangement is to borrow, from a commercial bank, the money needed to buy the deceased owner’s share. However, even if the business is successful in obtaining such a loan, the terms and repayment period could possibly make it unaffordable from a cash-flow point of view. In most cases, insurance would therefore be the more affordable solution.


Make sure you get advise from our insurance broker and leave no stone unturned.

THE SOLUTION

The purpose of a buy-and-sell agreement is to provide the surviving co-owners with cash to purchase the interest of a deceased co-owner. According to the agreement, each co-owner takes out life cover on the other co-owner’s lives. The life cover pays out on the death of a co-owner. This funds the purchase of his/her interest by the surviving co-owner(s). Disability cover can also be included to fund the buyout of a disabled owner’s share of the business.

BUSINESS OVERHEAD PROTECTOR

The Business Overheads Protector provides a monthly income during the period of disability.


The monthly benefit payments for a single cause (including dependent causes) is limited to 24 months.

  • Application

    Running expenses of a business: An ideal solution for a policyholder who needs to cover the running expenses of his business.

  • Features

    • The monthly claim amount payment will be the higher of the claim amount, calculated according to the following assessment criteria, subject to certain limitations:

    — Occupational disability:

    » Temporary or permanent disability caused by

    a bodily injury or an illness to such an extent

    that the insured life is continuously unable to

    perform the main duties of his own occupation

    on a total or partial basis.

    — Severity of impairment or illness:

    » Momentum will pay a percentage of the

    benefit amount for a specified payment

    period if the insured life meets any of the

    requirements for functional impairment,

    critical illness o

Interested in any of the above services? simply complete this form

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