https://www.aiglife.co.uk/intermediaries/business-products/business-protection/share-purchase-protection Individual Protection from AIG

Share Purchase Protection

Share purchase protection is a life or life and critical illness policy that allows remaining business owners to buy the insured partner’s or the shareholder’s interest in the firm should one of the business owners die or become either terminally or critically ill.

Why recommend Share Purchase Protection?

Share purchase protection is a life or life and critical illness policy that allows remaining business owners to buy the insured partner’s or the shareholder’s interest in the firm should one of the business owners die or become either terminally or critically ill.

Setting up share purchase protection

Each shareholder can take out an ‘own life’ policy with a sum assured equivalent to the value of their shares. They can then write the policy into trust for the benefit of their co-shareholders.

Shareholders may need to enter into an agreement that if one of them dies, the remaining shareholders can buy their shares from their personal representatives. Likewise, they agree that if one of them suffers a critical illness, the affected shareholder can choose to sell their share, which the remaining shareholders will then be obliged to buy. These are called double and single option agreements.

Any policies you set up must also be aligned with the Articles of Association and the shareholder’s agreement. There may also need to be a trust and / or buyback document in place for them to be effective.

Things to consider

Download the Business Protection Adviser Guide for help with the following:
Calculating the value of the business;

  • The tax implications of share purchase protection;
  • Articles of Association;
  • Business trusts;
  • Single and double option agreements (for shareholders);
  • Calculating and arranging a fair premium;
  • What happens when shareholders join or leave; and
  • Company share purchase (‘buy back’).

Literature and support materials

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F&TRC Business Protection Ratings

Ratings provided by Finance & Technology Research Centre (F&TRC)
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Reasons why – AIG Business Protection

Business Protection Term Assurance / Business Protection Critical Illness with Term Assurance
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Business Protection - Adviser guide

Guide
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