Shareholder protection allows business owners to buy shares back from a co-shareholder who is diagnosed with a critical or terminal illness or dies. This type of policy helps surviving owners stay in control and minimises disruption to the business.
It involves writing up a series of legal agreements that set out how shares are to be managed. Either the fellow shareholders or the company as a whole takes out insurance policies on the lives of each shareholder. Should a shareholder die, the policy payout can be used to purchase the shares of the deceased holder.
This type of insurance benefits all parties. The business can keep the shares, while the family will receive financial support from the monetary value of the shares.
As with other types of insurance, shareholder protection premiums are based on risk. The monthly amount will depend on a number of factors relevant to the insured person.