Corporate Insurance

Insurance solutions for business owners

Owning and operating your own business can be rewarding. But ensuring its long-term success and protecting it from financial risks can be challenging.

How will your business continue if you, a partner or other key employees can’t work due to a serious illness, disability or death? What strategies will you use to help build equity and manage business taxes? How will you provide benefits that help attract and retain the best people for the job?

Helene Meyer can help.

Whether your business is small, or large and complex, Helene can help address your unique business planning needs and offset some of the risks you face.

Helene works together with the Tax and Estate Planning group consultants to help create a solution that’s right for you. Contact Helene at 647-886-4822.

Buy/Sell Funding

Buy/sell agreements provide for the transfer of the ownership of the business in different circumstances; death, disability, retirement or disagreement.  At death or disability, for example, the remaining owners may not want to be in business with the deceased owner’s heirs or the non-active disabled owner.  As well, the heirs or disabled owner may prefer to receive the value of the deceased owner’s share of the business in cash.  If an owner retires, an agreement paves the way for business as usual.  If owners have a falling out, a buy/sell agreement will enable the business to continue or be “wound up” in an orderly fashion.

A buy/sell agreement should deal with:

  • Who will buy the shares’
  • What the terms of the sales will be’
  • When the sale will take place’
  • Where the money to buy the shares will come from; and,
  • How much the purchase price of the shares will be.

Proper funding should be in place to ensure that money is available to buy the shares of a deceased or disabled owner, should the event occur.  Life insurance provides the necessary dollars at a far lower cost than borrowing to fund a buy-out.  Funding the buy-out directly from cash flow can be difficult as the loss of the owner has probably already placed strains on the cash flow of the business.  The best alternative is to be prepared with life insurance.

The goal is simple: satisfy all parties so the business can get on with business.  Although a buy/sell agreement is a legal document, it still needs to be properly funded.  If it isn’t, an unexpected crisis could cause serious financial concerns for the business and its owners.  A properly funded buy/sell agreement provides access to adequate funds to facilitate any share purchase obligations contained within the agreement.

Key Man Insurance

Key person life insurance can help business owners, it’s life insurance to offset financial loss.

Business owners recognize the benefit of insuring their firm’s valuable assets, such as office equipment and inventory, to cover property loss.  Such assets, however, may not be as valuable as key persons.

A key person is anyone associated with the business whose special skills make a major contribution to the bottom line.  Some examples include the active business owner(s), employees who have strong relationships with valued customers, and any employee who has specialized knowledge and expertise that can’t easily be replaced.

Determining the Amount of Coverage

Calculating the potential financial impact of the loss of a key person’s services to a business may not be easy, and no set formula or rule can be used for all business situations.  In many cases, the amount of key person insurance is established in a somewhat arbitrary fashion.  Some questions that may be considered when determining a reasonable coverage amount can include:

  • What costs would need to be incurred to replace the person in question?
  • What amount of the firm’s net annual profits does the person generate or contribute to, and how long would these profits be affected if the person died?

Policy Structured for Corporate Protection

To implement key person life insurance in a corporate context, the corporation is the applicant for the life insurance coverage to be arranged on the life of the key person, and the named owner and beneficiary of any policy that is issued.

The premium is a non-deductible expenditure by the corporation and the life insurance proceeds are non-taxable when received.

Professional Advice

When considering key person life insurance, you should always consult with all your professional advisors to help asses the risk involved and the appropriate amount of coverage to be applied for. Contact Helene at 647-886-4822.