What is ownership protection?
Ownership protection is for businesses with more than one owner. It assists in providing adequate funding to help the business survive the shock of the (usually) unexpected loss of one of its owners. It provides for the smooth transition of ownership in the event of an involuntary (e.g. death) exit of one of the business owners.
How does ownership protection work?
Ownership protection is based on three of the standard forms of personal protection insurance: life insurance, trauma insurance, and total and permanent disability (TPD) insurance. The difference is that the insurance contract is combined with a legal agreement, so that:
- The business pays for the insurance.
- If a triggering event happens, the insured person (or their family) receives a lump sum.
- In exchange for this lump sum, the insured person's share of the business is transferred to the remaining business owner(s).
In other words, ownership protection benefits both parties: it provides a succession plan for the business in case of an unforeseen event, and financial security to the insured person or their family.
One of the main benefits of this insurance is that the remaining business owners do not have to find the lump sum themselves from business cashflow or personal reserves, or go to the bank to borrow it.
How much does ownership protection cost?
The cost of ownership protection depends on the value of the insured person's share of the business and their level of risk. Your CRA business insurance specialist will compare products from different insurers to get you the best policy to suit your requirements, at the best price.
What's the next step?
Talk to a CRA business insurance specialist. We'll guide you through the entire process, including applying for the required insurances and facilitating the necessary legal contracts. We'll also be here if you ever need to make a claim.