Business owners go to great lengths to protect their businesses against theft and other immediate, tangible risks, but risks related to the sudden death, disability or illness of a business partner are often overlooked.
A 2016/17 survey by PricewaterhouseCoopers found that while many businesses have some form of a succession plan in place, only 17% of South African family businesses have a succession plan that has been duly discussed and implemented. Disconcertingly, this figure hasn’t increased much in the years since the study.
Another cause for concern is the noticeable absence of business assurance in the small-to-medium enterprise (SME) space, where 69% of business owners say they would rather wait for their companies to grow in size before purchasing insurance, according to the 2016 National Small Business Survey.
“SMEs that ignore business assurance structures are exposed to serious business interruption risks,” warns Simon Seripe, senior manager of life and funeral benefits at Constantia Insurance Company.
Apart from the death of a business partner, other risks also include:
- Termination of employment
- Bankruptcy of a partner or co-owner
- Dispute among members in a family business
“The survival of a business is dependent on the development and implementation of a well-documented business succession plan,” he says.
Life and business in one
Seripe and his team at Constantia Insurance have developed a solution, called InBiz Life, that combines the benefits of group life insurance and business assurance. It requires no medical underwriting, as the solution is run through an automated platform, enabling businesses to finalise their cover within 10 minutes.
InBiz Life covers the insured for key-person assurance, which protects the company against the untimely death of a key person in the company; offers a buy-and-sell agreement that provides proceeds to the remaining shareholder(s) for the purchase of the shareholder’s interest upon death, disability, or diagnosis of critical illness; and contingency liability, a benefit that makes available proceeds to fund any liability related to the suretyship agreement entered into between the surety and the creditor on behalf of the business.
“The death or incapacitation of an active co-owner or partner places a business and the surviving partners under immense strain, often with dire consequences for the business,” says Seripe. It’s also important to keep in mind the family of the deceased, disabled or critically ill partner.
“A buy-and-sell arrangement enables the remaining owners to choose their future business partners,” notes Seripe. “While this protects business profitability and continuity, it also gives the family of the deceased partner the assurance that they will receive a market-related price for the deceased’s share of the business.”
The InBiz Life offering has been personalised specifically for SMEs. “InBiz Life is simple to navigate and is easily accessible through our platform, but it’s also affordable to SME owners,” he says. Business owners can purchase the group business offering at discounted group rates, which makes the product accessible to SMEs facing financial constraints.
“One of its unique features is the flexibility of nominating beneficiaries,” says Seripe. This enables business owners to split their group life assurance, benefitting both their family and business, but it also gives them flexibility in personalising the benefits to suit their needs.
“SMEs are the heartbeat of any thriving and sustainable economy and their continued success is imperative to our success as a nation,” Seripe concludes.