Financial protection for your client’s business if a shareholder dies or suffers a critical illness.
Financial protection for your client's business if a shareholder dies or suffers a critical illness.

What is Share Protection?

Share protection helps the surviving shareholders or partners keep control of the business if a major shareholder or partner dies. 

If a business doesn’t have this kind of protection in place, losing a major shareholder or partner can cause serious problems. A shareholder’s family could end up with a share of the business, for instance. And in the case of a partnership, the partnership will be automatically dissolved unless an agreement exists to the contrary.

Life insurance as a solution

Taking out life insurance, in conjunction with a suitable share purchase agreement, could help ensure that control stays with the remaining shareholders or partners and a substantial cash lump sum is available whenever death occurs. This, in turn, could mean the remaining business partners would be able to buy the deceased’s share of the business. 

Aviva’s Term Assurance policy could offer protection against difficulties your client may have in securing or re-allocating finance to purchase the deceased shareholder’s interest or shareholding. Cover is available for Private Limited Companies, Limited Liability Partnerships and Partnerships. 

Clients can take out cover on their own life or the life of another and can choose the level of life cover and plan term they want. You can add critical illness if a client wishes and (if appropriate) this can be incorporated into the shareholder agreement.

There are four agreements that our Term Assurance policy could be used to support. Each of these agreements would need to be arranged by the client, typically via a solicitor:

  • Buy and sell agreements. The equivalent of a prenuptial agreement for a business. If death is the trigger for the agreement (as it would be for Shareholder/Partnership Protection), the deceased’s estate have to sell their share of the business, and the surviving business owners/partners have to buy it. A pre-agreed method of valuation is used.

  • Automatic accrual method. This method is usually used for partnerships only because it doesn’t involve the purchase or sale of shares. Instead, the deceased’s shares are automatically passed to the remaining business partners.

  • Double/cross option agreements. Under this type of agreement the surviving owners have the option to buy the deceased’s share of the business, and the deceased’s personal representatives have the option to sell the shares to the surviving owners. If either party exercises their option, the other is obliged to comply. Most double option agreements only operate upon death, not critical illness.

  • Single option agreements. Suitable if your client wants to include critical illness with the life insurance policy. The single option agreement gives a business owner/partner the option to sell their share of a business to the surviving owners/partners if they fall terminally or critically ill.


For further information on our Term Assurance policy, please see the Key Features document (pdf)

Here are some of the facts you need to know about our Term Assurance plan which can be used for Share Protection.

Criteria Min/Max Detail Notes
Age Limits Min Age 16 Plans can be taken out individually or jointly but the cash sum is payable on the first claim only.
Max Age 89
Term Min term 1 year 6 years if critical illness option with reviewable premiums are selected
Max term 50 years

50 years for Life Cover only
50 years if Reviewable Critical Illness (pdf) is chosen
40 years if Guaranteed Critical Illness (pdf) is chosen

Payment
Limits		 Min premium

£5

Or £50 annually.
Monthly premiums must be paid by direct debit. Annual premiums can be paid by cheque or direct debit.

Maximum Cover None (life cover only) NA Maximum cover is £2,000,000 with Critical Illness option.
Critical Illness Option

 

Min age

 16

If your client chooses guaranteed premiums, the plan must end before the client’s 76th birthday. The maximum term of the plan is 40 years.


If your client chooses reviewable premiums, the plan must end before the client’s 91st birthday. The maximum term of the plan is 50 years.

 

Max age 59
Max Cover £2,000,000

This includes any other Critical Illness cover that your client may already have with Aviva, the former company Norwich Union and/or any other provider.
If the cash sum is paid upon diagnosis of a critical illness, no further benefit is payable on diagnosis of a terminal illness or on death.


Critical illness cover pays out a lump sum if your client  is diagnosed with a critical illness that meets our plan definition and then survive for at least 14 days. We only cover the critical illnesses we define in our plan and no others.
The children of the life insured are automatically covered under the children’s.View the Critical Illness Key Features (pdf)

 


Charges


There are no additional charges for clients to pay. All charges for our Term Assurance plan are included within a client’s monthly premiums.

Here is some information to help you to decide if our Term Assurance plan is right for your client.

Designed for customers who Not designed for customers who 
  • Want to protect against the financial consequences of death for a defined term (could be personal or business reasons)
  • Have financial dependants
  • Have creditors
  • Want cover for a specified term  
  • Want an investment-linked arrangement
  • Want protection for the whole of their life
  • Want a cash-in value
  • Want a life insurance amount that decreases over the term of the plan
 Key considerations  Possible alternatives
  • Level of cover required
  • Existing levels of cover
  • State of health
  • Financial liability assessment
  • Dependants
  • Succession planning if business protection
  • Trusts
  • Self-insurance (existing assets)
  • Whole of Life plan
 


We've got all the support you need

Whether you’re trying to identify potential business protection clients or you’re already selling it, you can get all the tools and support you’ll need here.


Prospecting Letters

Use our prospecting letters to help with that first step towards selling business protection products.

 
Trusts

Business protection policies can also be placed in trust, which could help to ensure any claim proceeds go to the right people as soon as possible. For more information view Your guide to protection trusts (pdf)

Case studies

Key Person Protection, Share Protection or Business Loan Protection? View our client guide (pdf) for case studies showing how different protection solutions suit different clients and how they make their decisions.
 
Contact us

We have a wide range of support staff available to help you, view our contact details to find the right number that meets your needs.
Or call our Business protection support team on: 0845 900 0818.

WA02178 07/2011

Related documents

For Adviser use only. This information has not been approved for use with customers.

Aviva Life Services UK Limited.
Registered in England No 2403746. 2 Rougier Street, York, YO90 1UU.
Aviva Life Services UK Limited is authorised and regulated by the Financial Services Authority. FSA Registration No 145452
www.aviva.co.uk