Partnership protection guards your clients’ businesses against losing control of the partnership in the event of a partner being diagnosed with a critical illness, terminal illness or if they die. A life or critical illness policy will provide funds to buy the interest in the partnership from the affected partner or their estate.
Partnerships and limited liability partnerships
There are two types - traditional partnerships and limited liability partnerships (LLP). A LLP will continue following the death of a member but profits will be paid to the deceased’s estate. If there is no Partnership Agreement for a traditional partnership, it will dissolve on death and the deceased partner’s estate and beneficiaries will be entitled to their share of the business.
Why it's needed
If a business partner dies or wants to leave when they are diagnosed with a critical or terminal illness, the remaining partners may want to buy their interest in the business and keep control. But only a few will have the financial resources to do so.
Taking out partnership protection insurance gives surviving partners the financial support they need, helping them keep the business running and retain control in difficult times.
Setting up Partnership Protection Insurance
In a standard partnership, each partner takes out a life or life and critical illness policy and writes it into trust for the benefit of the other partner(s). We have a specimen trust document – please check with your client’s legal advisers on the suitability of this document for their circumstances.
If there are just two partners, they can each set up a personal life of another policy.
The individual partners pay the premiums - you can adjust these to reflect each partner’s share in the business.
Although the partnership may have a name and a bank account, the business cannot own property or insurance policies in its own name. In the case of a LLP, which is recognised as a legal entity, the business (rather than individual partners) can own the policy. See our Business Protection Adviser guide for more information.
If you think partnership protection could be the right cover for a client, you can find out more information in our straightforward guide and supporting literature.
We give your clients access to Best Doctors for invaluable second medical opinions. Their knowledge helps your clients and their immediate family get the right diagnosis, treatment and care.
Best Doctors is a non-contractual benefit which can be withdrawn at any time without notice.
Literature and support materials
Business Protection Guide
This Business Protection help to support and streamline the advice process.
Reasons why - Business Protection
A guide to provide an example of what a ‘reasons why’ letter could contain.
Term Assurance for Business - Cover Details
Read our Cover Details for an explanation of how AIG's Business Protection cover with Term Assurance works.
Critical Illness for Business - Cover Details
Read our Cover Details for an explanation of how AIG's Business Protection - Critical Illness with Term Assurance product works.