Your succession plan should include a contingency or back-up plan. If illness or death meant that you were suddenly unavailable to manage the business, who would take over your responsibilities?
A contingency plan provides guidance on how the business should carry on in the event of your sudden death or disability. It sets out who would take charge in your absence in order to keep the business running. The contingency plan also takes into consideration how the succession process would be affected and how it should continue if you are no longer there to manage it.
Insurance can be an effective tool in managing risk prior to a business ownership transition.
Some of the key items an effective insurance plan can address include:
- Key person protection
- Buy-out funding
- Funding of capital gains tax
- Estate equalization
Using insurance strategically within a succession plan can be complex, so it is important to work with an insurance expert who can recommend the best approach for you.