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Partnership protection insurance safeguards businesses against losing control of the partnership if a partner is diagnosed with a critical or terminal illness or if they die.

The policy will provide the remaining partners with the funds to purchase the share or portion in the partnership from the affected partner’s beneficiaries or their estate.

  • Avoid the sale of personal or business assets to purchase the shares.
  • Protect the business against uninterested successors.
  • Ensure the affected partners’ beneficiaries are compensated.

The Alan Boswell Group Difference

ABG Difference

Insurance for your building is often considered a ‘must have’ but many risks are less obvious and should seriously be considered as your business grows and develops. Business protections policies tend to be considered under financial services rather than insurance as they are designed to cover the loss of personnel or monies – similar to a life insurance policy and includes shareholder protection, loan protection and key person cover.

Alan Boswell Group can provide advice on the full suite of business protection policies available to you and your business.

Partnership Protection Insurance in detail

If a partner in the business dies, or suffers a severe or critical illness, their share of the business would pass to their beneficiaries (often their family). This could result in a new partner who has little or no interest in the business, and may also leave the affected partners’ dependants financially vulnerable. Partnership protection insurance gives the remaining partners the funds to purchase the affected partner’s share and retain control of the business.

It could be difficult for the remaining partners to find the financial resources to purchase the share, and this may result in business assets being sold off. Partnership protection prevents this from happening and gives the business an element of stability during a stressful period.

FAQs

  • There are two options available when considering partnership protection:

    • Own life. Own life cover is suitable for businesses that have more than two partners. Each partner would take out their own policy, and pay their own premiums, the benefits of which are written in trust for the other partners. In the event of a successful claim, the remaining partners can use the lump sum to purchase the affected partners’ share of the business from their estate.
    • Life of another. This type of cover is suitable if there are only two partners in the business. In this case, each partner would take out life of another policies on the other partner. If a claim is successful, the remaining partner then has the financial means to purchase the affected partner’s share of the business from their estate.
  • If a partner passes away then this would trigger a claim. Assuming a successful claim, this would result in a pay-out being made to the business to be used to purchase the share of the partnership from the deceased’s beneficiary – usually their partner or children.

    If a partner withdraws from a partnership the policy would have to be cancelled. If the share of the partnership has been sold to another individual a new policy could be opened in the new partner’s name.

  • Anyone can leave a business at any time. So, if a partner leaves a partnership then the insurance policy would effectively become void and would need to be cancelled. If the share of the partnership is sold to another individual, a new policy can be opened in the new partner’s name.

    Please note that if a business only has two partners and one leaves it is no longer a partnership and a partnership protection policy is effectively void.

  • No. If a dual partnership loses a partner it can no longer be considered a partnership.

  • The difference is in the liabilities that the partner can face. A general partner’s business and personal assets come into play when it comes to paying off any company debts – but a limited partner’s liabilities is just that, limited. They have no personal liability and therefore their personal assets are not subject to any scrutiny when facing company debts.

  • The individual partners will each pay their own premiums for the policy. The premiums can be different depending on the partners’ personal circumstances (health, age etc) and so partners may want to subsidise each others payments.

  • An LLP will continue to operate in the event of the death of a partner with profits paid to the deceased beneficiaries or estate. In a traditional partnership, if there is no partnership agreement, the partnership would dissolve if a partner died, and their beneficiaries would be entitled to the share of the business.

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