Back to basics: life insurance key part of financial planning
By Kirsten Hastings, 1 Sep 17
IHT planning, nil rate bands and replacing pension scheme death benefits are some of the reasons life insurance needs to remain a core part of financial planning, according to Chris Lean, a chartered financial planner with Aisa International. Click through the slides below to see six key reasons advisers need to speak to clients about ensuring they are protected.
Many small to medium sized businesses often rely heavily on one or two key employees. Consider what would happen if one of them wanted to leave the business, there would undoubtably be a notice period and a few months to arrange a replacement.
The Grim Reaper often does not give notice periods and the loss of a key person overnight could cause big financial problems for a business.
The key person is an asset and is probably the only asset in the business that is not insured.
The shareholding of a business has value, but there may not be a ready market for these shares in the case of a small company. Upon the death of a shareholder, it is likely that the surviving family members would want the share of the equity paid out to them.
One way to ensure that the shareholder’s family are protected, and funds are available to buy those shares, is to arrange a shareholder agreement (of which there are various forms) with each shareholder being insured to the value of the equity held within the business.
Banks may lend money to a business, by securing guarantees on the assets of the business. However, again related to keyperson insurance, the death of a keyperson could give rise to the bank calling in the loan and the guarantees, with disastrous consequences for the business.
Tags: Aisa Group | IHT | Nil Rate Band | Pension
