As a business owner there are many decisions that need to be made on a daily basis. You work very hard at success, but have you thought about what would happen to your company if you or a key employee were to become disabled or even worse die? There are insurance products designed to help protect business owners and partners during these turbulent times.
Corporate Insurance
Life Insurance
As a business owner, what do you want to happen to your company when you die?
Business Life insurance has the same properties as the personal life insurance, however is corporately owned. The beneficiary is the company, and is used for whatever purpose the company’s owners see fit. The funds provided by this valuable coverage could be used to hire temporarily during this crucial time. Key people are hard to replace and extra liquidity to attract the right people might be necessary. Luckily, this product is available to provide these sums when typically businesses tend to suffer a drop in cash flow.
This coverage is instrumental in funding Buy-Sell Agreements.
If you partner dies, did you realize you are forced into a partnership with his/her estate whoever that may be? This is usually very undesirable and can cause great detriment to the ongoing management or even survival of the business.
Owners can combine Life Insurance coverage with their shareholder’s agreement to design a Buy/Sell plan to provide the funds to help each other prevent this unwanted circumstance. The funds provided by the Life Insurance proceeds can be used to purchase the inherited shares or ownership interests from the deceased’s estate. When a shareholder’s agreement is drafted, partners predetermine the course of actions to be taken and the formulas to be used to establish the Fair Market Value duly owed to the deceased partner’s estate. This coverage supplies the funds necessary to carry out this agreement and alleviates the financial burden from the business to allow it to continue to operate while preserving the highest value for the estate. After all, presumably the deceased partner would surely want their estate to get full value for all the time and sacrifice he/she had dedicated to the business.
Statistics:
- There are an estimated 225,800 new cases of cancer, and 83,300 deaths from cancer that occurred in Canada this past year.
- 30% of new cancer cases and 17% of cancer deaths will occur in young and middle-aged adults ages 20-59, in their most productive years of employment and raising families.
- Approximately 1 out of every 4 Canadians will die from cancer.
- Approximately every 7 minutes in Canada, someone dies from heart disease or stroke.
Critical Illness
What do you want to happen if you, your business partner or a key employee can’t work because of an illness or injury?
Corporate Critical Illness is a corporately owned policy on owners or key employees that can be used to protect a business should the insured need to take time off of work to recover. A business can be put into severe financial strain and Keyperson plans provide benefits in the event that a key employee becomes unable to work.
This coverage is instrumental in funding Buy-Sell Agreements. Most business owners are aware of the need for having Life Insurance to protect them against the loss from the death of a partner but often neglect the equally important risk (and higher statistical risk) in the event of a Critical Illness.
Owners can combine this coverage with their shareholder’s agreement to design a Buy/Sell plan to provide the funds to help business owners purchase the shares or ownership interest of a critically ill shareholder or partner. When a shareholder’s agreement is drafted, partners predetermine the course of actions to be taken in the event of a Critical Illness. This coverage supplies the funds necessary to carry out this agreement.
Should a key employee or partner have the good fortune of remaining healthy until retirement, these plans can also be designed as Executive Health Savings Plans. This structure provides for a great tax advantaged solution to compensate key employees or owners by paying out a lump sum tax free from the company at the targeted retirement year. This structure requires a long time horizon of at least 10 years, generally 15 for maximum benefit but provides a great loyalty incentive while protecting the company’s interest from day 1. Allow us to demonstrate the power of this strategy for your business.
Statistics:
- Up to 50,000 Canadians suffer a stroke each year 1 in 3 women and 2 in 5 men will develop some form of cancer over their lifetime.
Covered Critical Illnesses:
- *Alzheimer’s Disease, Aortic Surgery, Aplastic Anemia, Bacterial Meningitis, Benign Brain Tumour, Blindness, Life Threatening Cancer, Coma, Coronary Artery Bypass Surgery, Deafness, Heart Attack, Heart Valve Replacement, Kidney Failure, Loss of Independent Existence, Loss of Limbs, Loss of Speech, Major Organ Failure on Waiting List, Major Organ Transplant, Motor Neuron Disease, Multiple Sclerosis, Occupational HIV, Paralysis, Parkinson’s Disease, Severe Burns, Stroke and Early Discovery Benefit.
*Important note: Please refer to the recommended insurance company’s contract for specific definitions for the covered conditions and the requirements you must satisfy to receive benefits.
Business Disability Insurance
Can your business survive if you become disabled? Business Disability Insurance usually has 3 different types of products.
Business Overhead Expense plans provide a monthly benefit amount which is calculated based on your company’s eligible fixed expenses. In the event that you become disabled, the product would pay for the approved amount after a 30 day waiting period. The benefit period can range form 12-24 months and could ultimately protect you from bankruptcy.
Keyperson plans provide benefits in the event that a key employee becomes disabled. This type of coverage often alleviates the financial burden from a business and can be instrumental in the business’ survival.
Buy/Sell plans, combined with a shareholder’s agreement, can be designed to provide the funds to help business owners purchase the shares or ownership interest of a totally disabled shareholder or partner.
Statistics:
- On average, 1 in 3 people will be disabled for 90 days or longer at least once before the age of 65.
- The average length of a disability that lasts over 90 days is 2.9 years.
- 3% of mortgages are foreclosed due to death, 48% due to disability.
- Arthritis is the most common cause of long term disability in Canada.
- Between 1991 and 2031, the prevalence of disability due to arthritis is projected to grow from 2.3% or 572,000 Canadians to 3.3%.
Group Insurance
How can you make your employees happier and more productive?
If you are a business owner you should be considering a group insurance package for yourself and your employees. A group package is a great way to get coverage you need with a group discounted rate. It is also a great way to attract new employees and retain your existing trained staff. Good people are what makes a company run and they are an invaluable resource to preserve. By offering them good employment benefits through a group insurance plan you are giving them incentive to stay. It is a good way to show how much you appreciate their work especially since these benefits extend to their families.
Business wise it is a great decision for reasons mentioned above but also, did you know it creates tax advantages? It can actually cost you less to compensate a pay raise by offering a group package than by increasing a salary. These are strategies that could be explored for your business, contact us for more details.
If you already have a group package, perhaps we could still be of service. We could review your plan to see if it can be improved or we could shop the market for you to make sure you have the most competitive rate. If this is of interest, please contact us, it would be a pleasure to provide you with our recommendations.
A Group Benefit Package can consist of :
- Life Insurance (for spouse and children too)
- Disability Insurance (Short Term and Long Term)
- Health Care Insurance (Prescription drugs; now mandatory by law)
- Paramedical Services (physiotherapy, psychologists …)
- Dental Insurance (cleanings, preventative, major restorative…)
- Vision Care Insurance (glasses, contacts and examinations)
- Travel Insurance (work or leisure 24/7 anywhere in the world)
- Group Registered Retirement Savings Plans (RRSP)
- Deferred Profit Sharing Plans (DPSP)
- Pension Plans (a whole variety of investment choices)
- Group Registered Education Savings Plans (RESP)
