Things to know about shareholder protection insurances

Nothing is permanent in this world and this is the reason for mushrooming of insurance companies. There are different kinds of insurances such as a car insurance, medical insurance, house insurance, annuity insurance etc. All these assure that we are financially covered when something unpredictable happens....


Things to know about shareholder protection insurances
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But, how many of us are familiar with business protection and shareholder insurances? If you are a planning to start a business or already own one then it is good to know more about it: 

Why is it important to protect your business?

For a business with two or more shareholders, and if something happens to one of the shareholders - it is crucial to ensure that the other members are safeguarded.  Be it a retailer or IT sector or any manufacturer, every business needs protection. It is imperative to cover the involved shareholders, employees, their families and loved ones. When there is a sudden demise of the business owner, it can have a serious impact on the business and shareholder’s family.

The other investors involved may wish to purchase this part of the share, but may not have enough funds for clearance. This is where business protection and shareholder insurances serve a great purpose.


Shareholder protection Insurance policy
ensures that the consequences of shareholder’s death are stress-free and smooth. The process involves lots of legal documentation - to explain how shares are to be managed by the other shareholders after an unexpected loss. Some of the benefits of Shareholder protection Insurance policy include:


Ensuring stability and smooth flow of business
A sudden death of a shareholder can shake up the entire business and can greatly impact operations. On choosing a shareholder protection insurance policy – it will make sure that; the other investors receive pay-outs to buy the deceased shares quickly and efficiently. This, in turn, assures peace for all the involved members.


Supporting concerned family members
Families are greatly affected after losing a sole breadwinner. For such cases - Shareholder protection insurance policy will ensure that the company investors provide some financial compensation to the bereaved families. Cash payments can also be a great source of relief to help families cope up with sudden changes.


Severe ill health and disability
In case of, shareholder’s serious illness or disability – Shareholder protection insurance policy ensures safe coverage. The legal agreements of policies make sure that - the suffering investor can sell his shares to the other business partners. This can be a great aid for everyone involved in the business.


Different types of Shareholder protection insurance

The three main types of shareholder protection insurance policies are:

1. ‘Life of another’ policy
This policy is applicable to businesses involving two shareholders. On the demise of any one shareholder, the survivor policyholder gets to purchase the deceased shares and he can take up the complete ownership.


2. Company share purchase
This policy assures that the company itself can buy the deceased shareholder’s shares. However, it quite a lengthy and complex process due to the company laws and tax procedures.

3. ‘Own life’ policy
This policy ensures that every shareholder policy is under the business trust. Here the deceased shares are equally distributed among all the surviving shareholders.


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