Here's what might happen:

• Other shareholders may have to buy the shares of the affected shareholder
  at a moment's notice - how do they pay for this?
• The business may incur contractual penalties because the key person is
  not available
• The business may be perceived as less stable, and therefore less attractive to potential funders (such as the bank) - when you need them most
• The business may be less able to obtain credit for capital development, and also
  may suffer from a lack of cashflow

If you want your business to survive - and who wouldn't? - it makes sense to plan for the worst.

BRAVEday helps your business develop a plan to:

• Eliminate or substantially reduce debts and financial obligations
• Replace revenue put at risk
• Provide capital for planned requirements
• Fund the cost of replacement people

We have two key business insurance products, shareholder protection and key person cover.

Shareholder Protection

Shareholder protection ensures the remaining shareholders can buy out a business
partner or their estate if they need to sell their shares in the company due to serious
illness, injury or death.

Wayne was a shareholder with two others in a $6 million company. He survived a heart attack and it changed his perspective on life. After recuperating and returning
to work for a few months, he decided to sell out his company shares to spend
more time with his family. Good for Wayne, but his fellow shareholders
had to choose between paying him $2 million from their own funds or
borrowing the money for his shareholding. 

If Wayne's partners had set up the right shareholder protection insurance, they would've been able to pay Wayne out without a hitch, using the insurance proceeds  - and without the resulting bad taste in their mouths.

Setting the rules: Buy/Sell Agreements

When you have shareholder protection cover, you will also need a buy/sell agreement - an agreement that all shareholders sign before anything happens, that sets the ground rules for what happens if a shareholder dies or is taken out of the business. You can discuss a buy/sell agreement with your lawyer, or we can refer you to a lawyer we know and trust.

Who owns the policy?

Shareholder protection insurance policies aren't owned by the business, they're usually owned by the individual shareholders, in much the same way as insurance policies between a married couple. Shareholder A owns the policy for Shareholder B, and vice versa.

Shareholder protection insurance can include Trauma Cover, Life Insurance and Total and Permanent Disability.

You can also appoint a trustee to hold insurance policies. This ensures the terms of the buy/sell agreement are implemented, but can add additional cost and complications. As always, we recommend you talk it over with your BRAVEday adviser, because everyone's situation is different.

Key Person Cover

Key person cover allows your business to keep rolling, even when you lose someone that has a big impact on revenue. It could be your top salesperson, or it could be the admin assistant who keeps everything running. Whoever it is, if they're a key asset, you can prepare for the day they're not there.

Key person cover injects cash into the business to cover the costs of things like recruiting, eliminating debt, and meeting contractual and capital obligations.

How much cover?

When you lose a key person, you've got several things to consider. Most important to your cashflow is replacing the revenue that person directly brought in. Then there's the time needed to find someone to replace your key person.

The basic equation is:
attributable income (how much money that person brought in) 
x recovery period (how long it takes to find a replacement and bring them up to speed)
= revenue at risk

Beyond revenue at risk, the loss of your key person may also affect capital requirements. For example, your business may have plans to expand, but the sudden loss of your key person may cause your business to look less attractive to potential funders, putting those plans in jeopardy.

You may also have contractual agreements in place which have penalty clauses for non-completion of contracted work. If your contractual agreements depend on your key person being there, it's wise to include this amount in your cover.

You can also incorporate the cost of recruitment into your cover. This could include recruitment agencies, travel, housing and accommodation of family, training, inducements and legal and contract expenses.

With key person cover, you need to consider the entire costs associated with your key person. As with all insurance, you need to consider what you'll really need at claim day, not just the lowest premiums.

Lump Sum or Cashflow?

You can tailor key person cover cover to meet your biggest needs, whether that's a lump sum to pay off debt, or a regular cashflow to cover running expenses.

No two businesses are the same, and these are not off-the-shelf products. Our main business is to take care of you on claim day - and that process starts when we meet you and understand your needs. Talk with a BRAVEday adviser today.

Take Action

Contact us to talk about your business goals and dreams, and how to make sure they happen, no matter what.

Or, discover the five events that could stop you cold by clicking on the Quotes & Advice link on the main menu.