Best laid insurance plans for the worst of times

Peter Mensah

You have spent years, sacrificed time with family and more importantly, invested your hard-earned money into building your business.

As the business has expanded and grown, you have brought others into the business and you are now not the only owner or shareholder.

But, have you thought about what might happen to your business should things not continue to go to plan? How would the business cope if something were to happen to you or your partner? And what impact would this have on your families?

The SME Challenge

Many small to medium size businesses rely on the complementary skills and abilities that shareholders bring to a business for day-to-day survival. With the increasing responsibilities of compliance, investment in time and expertise in planning for the ongoing success of the business, there is a lot at stake. Protecting against the loss of shareholders should be a must for all businesses.

While key person protection is fairly common, this covers the loss of a key person in the day to day running of the business, protection for the permanent loss of a shareholder is often ignored because the effects of this are often not thought out or contemplated.

Of course, when something does happen to go wrong it can be devastating, particularly as it usually happens at an emotionally sensitive time.

An Example

Take the example of two friends who set up a business together as single men.

As both were important to the business’ success, they took out key person insurance on each other to help the business should something happen to either one of them.

However, they declined to look at shareholder protection. Over the next few years, they both married and started families.

A couple of years later one died in an accident. The key person insurance paid out to the business to allow it to continue operating as intended. The widow of the deceased shareholder knowing of the payout assumed that this was to be for her benefit… unfortunately that was not the case and left a very unhappy and acrimonious situation.

What insuring shareholders can help protect against

If you or a fellow shareholder suffered a major critical illness, permanent disablement or death, what would happen to your business ownership? Putting in place protection for your shareholders can provide financial support to help protect against (a) the remaining owners having to borrow to raise funds to buy out the interest of the co-owner who has left the business; or (b) the remaining owners being forced into business with the spouse or dependents of the co-owner if they die; or (c) the forced sale of the business to raise enough money to pay out a deceased owner’s estate.

Other Options

Shareholder Protection however is only one of a number of protections that business owners should consider in safeguarding the future of their business.

On its own it will only do a part of the job.

Running a business is demanding enough when you are all alive and healthy, do not run the risk of losing it all by not putting the appropriate protections in place.

PIC Insurance Brokers has been helping New Zealand businesses for over 25 years. We can help you find the right solutions to protect your business should the worst happen and ensure the best outcomes.

Being 100% New Zealand owned business gives us independence which is good for you because everything we do is tailored to your needs.

We are totally tuned into all the things that affect your life.

We cover all areas of insurance from life, trauma, health, business, house, contents and vehicles.

We are proud supporters of Indian Newslink.  For more information, please visit our website

Peter Mensah is Head of Distribution at PIC Insurance Brokers. Email:

PIC Insurance Brokers is the Sponsor of the ‘Best Small Business’ Category of the Tenth Annual Indian Newslink Indian Business Awards the Presentation Ceremony of which will be held at a Gala Black-Tie Cocktails, Dinner, Speeches and Entertainment Night at Sky City Convention Centre, Auckland City on Monday, November 27, 2017 from 5 pm. Tickets for the Event, priced at $150 per person and tables seating ten persons each priced at $1500 plus GST per table are now available. Please call 021-836528. Email: 

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