Each shareholder or partner is seen to have an insurable interest in the other for these purposes.
The type of policy that would normally be used is a term life insurance plan. Each shareholder would take out a separate policy to cover the lives of the others.
Partners in Business
Partners in a business partnership could also find themselves in a similar situation, except it would be the partner's share, which could be in danger in the event you die prematurely. Establishing a special partnership scheme would help provide formal guidance and a connected life insurance plan would provide the funds for the surviving partners to buy out the deceased partners stake in the partnership.
Key Man life insurance
It may be that your business relies heavily on a key person. Perhaps they have a specialist skill or knowledge which would be difficult to replace in the event they were to die prematurely. If this is the case your business would have an insurable interest in this individual and so the business owners could take out a life insurance policy on their life. Once again a term life insurance policy would normally be set up for this purpose.
Some employers also offer a 'death in service' benefit.
Sometimes employers will set up a life insurance policy for the benefit of an one or more employees. The benefit payable from these plans is usually expressed as a multiple of the employee's salary. These arrangements can be for individuals as well as specific groups of employees.
Putting in these types of protection can prove invaluable, but they are also quite complicated and are usually part of a wider financial strategy.
As such it's strongly suggested you seek professional advice from a financial expert if you're considering any of these options. Our advisers can help you with all of the above subject areas.
