What is Partnership Insurance? Do I need it?
Partnership insurance is a well-designed insurance plan for businesses that are run by two or more partners.
In the UAE, numerous businesses are set up as partnerships. However, rarely do the partners realize the implications of what would happen to the business and the family members if one of the partners gets severely ill or dies. Would the business suffer a loss either through reduced revenues or monies stuck in the market? Would the deceased partner’s shares get passed on to their next-of-kin who may not be interested in running the business at all or might not have business acumen and technical skills to support the business like the previous partner?
Fortunately, policies like partnership insurance allow for partners to be ready for this eventuality. This type of insurance also safeguards the business in the scenario where one of the partners survives the accident or illness but chooses to leave the company.
Is it necessary to buy partnership insurance?
Understandably, no one wants to think about tragic events while running a business with a partner. But, not planning for it properly might result in undesired outcomes after an unfortunate event in the future. Not being prepared for such events means your business can fall apart quickly once your partner gets out of the business due to any of the following reasons.
In case of the death of one of the partners, a partnership insurance plan will give the business a cash payout. It will allow the remaining partners to buy the shares back from the family of the deceased partner to regain full control and business continuity. This is beneficial for the deceased partner’s family as well as they are able to liquidate their holdings in the business and live a dignified life in the absence of their family member.
In addition, this lumpsum payout enables the remaining partners to find a suitable replacement (partner or an employee) and bring him/her on board without worrying about hefty salaries as the business will have the luxury of cash sitting in the bank account.
The cash flow resulting from the death of a partner, into the business, also gives confidence to the vendors, clients, and other business partners that the business will be able to tide over difficult times and come out stronger on the other side.
If one of the partners falls critically ill, then a cash payout is made to the company. This helps the business in many ways. Firstly, it enables to critically ill partner to get medical attention and be able to take the time off without a significant impact on his personal finances. In addition, if the partner needs to take a medical leave of absence or is working with the company at reduced capacity, it enables the business to hire the necessary people for the business operations to go on as smoothly as possible.
In short, a partnership insurance policy is a guarantee that your business would be least impacted by the death or illness of a partner and that the business can carry on its operations profitably.
At New Age Insurance Brokers LLC, you will find the most trusted insurance advisors who will help you to make sure that your business remains protected should any partner of your business get out of the equation. To know more about partnership insurance, feel free to contact us at firstname.lastname@example.org.