Note

Preferably share purchase agreement should be in place and all partners should be covered. Otherwise, individual consideration is required.

Cover

• Life, TPD
• Sum assured = Value of insured's shares

Purpose

• If a business owner dies, his shares will pass to his legal heirs
• The remaining business partners may need cash to buy the shares back

Beneficiary

Company (business partners)

Insured

Business owner / shareholder

Evidence

Depending on sum assured: 

• Application
• Financial questionnaire: Business cover
• Independent third-party evidence: 
  • Company valuation by independent third party
  • Shareholders agreement / share purchase agreement
  • Financial statement confirmed by an independent third party incl. share

Income

Usually a 3-year average should be used. Be careful with trends, high deviations, and one-off payments.

• Net profit before tax * share percentage
• Company valuation

Calculation

Sum assured = company valuation * applicants share

Plausibility check:

Multiple * average 3 years net profit before tax * share
(Multiple: 5 to 10, depending on nature / stability of business)

Please note: Do not add back shareholder funds or depreciations