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Shimanda Capital | Business Assurance
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How does the plan work
  • The employer takes out a policy on the life of the employee with the
    purpose of compensating the business for the loss it will experience
    should the employee die or become disabled
  • Ensure that there will be cash available to absorb any financial
    disruptions to the business e.g. loss of profit, recruit and train a
    replacement
Structure
  • Contract Party
  • Life Assured
  • Beneficiary
  • Premium Payer
  • Business
  • Key Employee/Director
  • Business
  • Business
How does it work?
  • Agreement between the shareholders/members of a business entity,
    obligating them to sell their interest on death(or disability), to the survivors and likewise obligating the survivors to purchase the deceased’s (disabled) shareholders shares/ members interest
  • Partners/shareholders/members enter into a contract in terms of which they affect policies on the lives of each other e.g. A and B effect a policy on C’s life; B and C effect a policy on A’s life and A and C effect a policy on B’s life
  • Premium payers should be the co-owners and not the life assured.
  • Co-owners will contribute to the premiums in the same ratio in which they intend to purchase the life assured’ share
Structure
Standard Method Policy 1 Policy 2 Policy 3
Contracting parties A & B B & C A & C
Life assured C A B
Beneficiaries A & B B & C A & C
Premium payers A & B B & C A & C
Cover amount To the vaalue C's business interest
and in the proportions agreed upon [Include estate duty if applicable]		 To the vaalue A's business interest
and in the proportions agreed upon [Include estate duty if applicable]		 To the vaalue B's business interest
and in the proportions agreed upon [Include estate duty if applicable]
How does the plan work
  • Business insures the life of the member/share holder who has signed as
    surety or provided a personal security for a loan taken out by the
    business
  • Business pays the premiums
  • Agreement is entered into between the business and the
    member/shareholder whereby the business undertakes to utilize the
    proceeds of the policy to repay the loan upon the death/disability of
    the member/shareholder who had given personal security for the loan
Structure
  • Contract Party
  • Life Assured
  • Beneficiary
  • Premium Payer
  • Cover amount
  • Business
  • Surety
  • Business [if security cession,
    cessionary]
  • Business
  • Amount of outstanding loan [plus
    estate duty if applicable]

Suretyship agreement must accompany the application documents