When Mr Slate, the roofer, is hit by lightning repairing the church roof, his partner is left consoling a heavily pregnant Mrs Slate who is now the not-so proud half-owner of “Slate & Bodge Roofing Contractors Ltd”.
Mrs Slate is terrified of heights, blames Mr Bodge for getting her daredevil husband into roofing at all and is now looking for any buyer to turn her unwanted shares into much needed cash. Mr Bodge’s bank turns him down for a remortgage or loan because he’s self employed and his accounts aren’t perfect. So Mrs Slate sells her share for half the asking price to “The Low Price Roofing Multinational”, who are opening a new branch in nearest town. The huge conglomerate then succeed in shutting down Bodge and laying off his 3 lads within a month.
If “Slate & Bodge Roofing Contractors Ltd” had taken out a relevant life policy, they’d have had a payout to cover Slate’s shares, take on an extra man and remain operational, whilst Mrs Slate would have achieved the full value of her shares. They could even have claimed the premium as an expense.
Ask yourself these questions:
Who do my partner’s shares pass to in the case of their death?
Would that person become a director or sell?
Can I afford to buy out my partner in an emergency?
If my partner is off work, how long and at what level can I operate for?
Unfortunately many company directors conform to the old stereotype, the wrong side of 40, balding, stressed, overweight and without the willpower or time to tackle it. New Year is a great time to make a resolution and start focusing on health, however it’s often clear to colleagues and business partners that a little insurance in case of a lapse in willpower wouldn’t be such a terrible thing!
If a director is off work recuperating for a period of time (for example after a heart attack), they may consider giving up their stressful job (often on their family’s recommendation) and look to sell their shares, once again putting financial strain on their partners. The length of time a business can operate without one of it’s directors is hugely dependent on how many people are within the business. A sole trader without staff is far more likely to struggle when left on his own than a bigger company, however the managing director of a production based company might leave behind a hassled financial director who struggles to get the best from the workforce and manage the accounts department too. This is the worst possible time to have to remortgage your home to buy out your ailing partner!
If you have any concerns our experts can offer a free quote and advice service for your business needs. Just give us a call on freephone: 0800 0567 112
©VitalInsuranceServices December 2014
As Commercial and Referrals Director at Vital Insurance Services I deal with a lot of different businesses, from a huge range of industries.
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