It is a form of insurance which protects the company and company shareholders against the critical illness or death of an owner or shareholder in the company.
In the event of a business owner or shareholder dying or being diagnosed with a terminal or specified critical illness, share protection can provide a lump sum to the remaining business owners. This means that in the event of a valid claim being made during the length of the policy, the lump sum could be used to help purchase the deceased partners/shareholding directors/members interest in the business.
If a business owner or shareholder dies with no share protection in place his or her share in the business may be passed to their family. Surviving business owners could lose control of a proportion, or in some circumstances, all of the business. The family may choose to become involved in the ongoing running of the business or could even sell their share to a competitor. A share protection policy can help avoid these issues.
The shareholder protection insurance provides financial support to the remaining shareholders of the company. It gives them the necessary funds to buy the deceased’s shares. This protects the company from falling into the hands of a reckless party and it can ensure that the critically ill or deceased shareholders dependents are able to sell the shares quickly and gain access to funds.
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