Shimanda Capital | Business Assurance
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| The employer takes out a policy on the life of the employee with the purpose of compensating the business for the loss it will experience should the employee die or become disabled |
| Ensure that there will be cash available to absorb any financial disruptions to the business e.g. loss of profit, recruit and train a replacement |
| Contracting Party | Business |
|---|---|
| Life Assured | Key Employee/Director |
| Beneficiary | Business |
| Premium Payer | Business |
| Agreement between the shareholders/members of a business entity, obligating them to sell their interest on death(or disability), to the survivors and likewise obligating the survivors to purchase the deceased’s (disabled) shareholders shares/ members interest |
| Partners/shareholders/members enter into a contract in terms of which they effect policies on the lives of each other e.g. A and B effect a policy on C’s life; B and C effect a policy on A’s life and A and C effect a policy on B’s life |
| Premium payers should be the co-owners and not the life assured. Co-owners will contribute to the premiums in the same ratio in which they intend to purchase the life assured’ share |
| Standard Method | Policy 1 | Policy 2 | Policy 3 |
|---|---|---|---|
| Contracting parties | A & B | B & C | A & C |
| Life assured | C | A | B |
| Beneficiaries | A & B | B & C | A & C |
| Premium payers | A & B | B & C | A & C |
| Cover amount | To the value C's business interest and in the proportions agreed upon [Include estate duty if applicable] |
To the value A's business interest and in the proportions agreed upon [Include estate duty if applicable] |
To the value B's business interest and in the proportions agreed upon [Include estate duty if applicable] |
| Business insures the life of the member/share holder who has signed as surety or provided a personal security for a loan taken out by the business |
| Business pays the premiums |
| Agreement is entered into between the business and the member/shareholder whereby the business undertakes to utilize the proceeds of the policy to repay the loan upon the death/disability of the member/shareholder who had given personal security for the loan |
| Contracting Party | Business | |
| Life Assured | Surety | |
| Beneficiary | Business [if security cession, cessionary] | |
| Premium payer | Business | |
| Cover amount | Amount of outstanding loan [plus estate duty if applicable] | |
| Suretyship agreement must accompany the application documents | ||