It is not only families that are affected by the death or incapacity of a spouse or parent. That same person could also be a partner, shareholder or director of a business.

A business needs to be secure if an owner or key employee suffers a serious illness or dies. Banks may want overdrafts repaid, debts may need to be cleared, new staff recruited, a drop-in profits protected or the means to retain business ownership. For this reason, businesses seek to insure their owners and key staff in the event of death or serious illness.

It is common for private limited companies or partnerships to be established by like-minded or trained individuals working together in a common interest.

A business may be owned for example by three people, over time the business and the management responsibilities grow. If one share holder were to die, a third of the business could be inherited by a spouse without the same skills or knowledge. The remaining two shareholders may wish to pay to the deceased’s family, the cash value of the inherited shares and retain full control of the business. The deceased’s family may want cash rather than shares, so all parties benefit.

Certain people may play a vital role in the profitability of a business such as a managing director, technical director or sales director. The impact of a death or critical illness on such an employee may cause a significant impact on a business. It may impact a credit rating, a share value, future sales or overburdening responsibilities on remaining directors.

In order to reduce the financial impact such an event may have; a company or partnership can take out a life insurance or critical illness policy on the key members of staff. The business would receive the payment upon any successful claim and use it to repay debt, aid recruitment or make investments etc. so the business can successfully carry on.