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PLANNING FOR TROUBLE
Milan Topolovec - special to The Ottawa Business Journal, November, 2005
Taking care of business owners' personal insurance needs provides an insurance specialist with both a challenge and an opportunity to add exceptional value to their advisory team. An insurance specialist plays an integral role to ensure the business owner is properly protected against disability, critical illness, and death.
Business owners can receive their remuneration in the form of salary, income splitting, bonus and/or dividends. The Long Term Disability of the group insurance contract does not recognize all forms of remuneration and typically only covers salary income. My belief is that group LTD coverage exhibits reverse discrimination and leaves the business owner with a false expectation that they are protected.
Individual policies are designed to eliminate the risk associated with a disability. Disability policies are available to meet some of these specific needs:
Executive compensation arrangement Key person Office overhead Disability buyout Loans
Critical illness insurance can be utilized by business owners in a number of situations. This contract pays a lump sum benefit after the insured has had one of 24 critical illnesses typically covered by most contracts subject to certain survival provisions. The majority of claims paid are for heart attack, stroke, and cancer.
Contractual definitions differ from one insurer to the next and this is where a knowledgeable insurance specialist can provide you with information that will enable you to choose an insurer as well as a policy that meets your needs. Critical illness proceeds can be used to cover:
Executive compensation Key person Buyout of a partner or shareholder, etc.
Life insurance coverage is a valuable asset that provides the business, shareholders, and the estate with money at the time of death. It is critical that the contract is integrated to meet each business’s unique requirements.
Your insurance advisor should review your legal structure and documents to ensure the policy will cover the needs and does not create a taxable event when the proceeds are paid out upon death. Life Insurance proceeds provide necessary funds for:
Key person Buyout of a partner or shareholder, etc. Loans
Working in a team environment with your lawyer, accountant, insurance specialist, and banker will guarantee the business owner that all stakeholders are protected. Taking the necessary time to complete an audit will be time well invested to receive peace of mind, potential premium savings, tax efficiency and avoid future legal conflicts. |
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