Get in touch with us

Book a FREE consultation
and receive your complimentary eBook

Get started with a free strategy consultation and receive a copy of the Good Fortune Guide – written by James McFall, Managing Director Yield FP and 2020 National Finalist Certified Financial Planner of the Year to help educate you on your Financial Plan.

    What areas of financial planning are you looking for advice on?

Book a FREE consultation
and receive your complimentary eBook

Get started with a free strategy consultation and receive a copy of the Good Fortune Guide – written by James McFall, Managing Director Yield FP and 2020 National Finalist Certified Financial Planner of the Year to help educate you on your Financial Plan.

Business Partnership Insurance

A Yield Client Case Study

Business Planning

Business partnership agreement put in place.

 

Life Insurance

Level premium saving of approx. $688,000.

Wealth Protection

Approx. $5,000 p.m more cover each

Overview

Clients of ours have a business that has a profit of about $800 – $1.6mill per annum. They had an old partnership agreement and some insurance in place that had not been reviewed in several years.

They did not have a buy/sell agreement and were not clear on what was in their original partnership agreement. They had not really even discussed what their longer term plans were within the business and what they wanted to happen long term with their asset.

We had two meetings together reviewing what they would like to happen, if either death or disability were to transpire and discussed generally some business succession considerations.

The discussion involved:

  • Estimating the value of their business.
  • Identifying how long they agreed the business could sustain and/or they would be prepared to pay the other equal drawings if they were to be partially incapacitated.
  • How things would play out if either one of them were to become permanently incapacitated.
  • How things would play out if either one of them were to pass away.
  • Identifying how much they would need individually as an income if their regular drawings stopped.

The above discovery raised several interesting conversations.

Once we were clear on the above, we compared the cost of the cover they needed to market. After identifying the top three policies for the needs, based on price and policy terms, we asked these three to run internal quoting and offer a better than the standard price. Given the total cost of the policies was in excess of $30,000, the insurers obliged by providing structuring suggestions and reduced pricing, with the provider we elected bringing down their price by $1,500 per annum.

 

We compared their current cover to what we recommended and besides the fact the level of cover they had was very low, relative to their stated need, it was also:

  • Expensive.
  • The Life/TPD was owned personally, so paid for from net income and only $112K. They estimated $1.6mill as the total value for their business.
  • Life/TPD owned in a company, with the intention of funding the business needs. This was $1,050,000 of cover and greater than their need.
  • Business expenses cover of $23,000 pm for 12 months, which was the right cover amount but expensive compared to the market.
  • Personal covers were low ball levels and poorly considered cost and structure.
  • All covers were on stepped premium.

Outcomes

As a consequence of our advice, they have:

  • Life/TPD– $988K more cover to fund a buy out
  • Life/TPD– $50,000 less Life insurance and $300,000 less TPD within the company to fund business needs. The lower TPD level is due to the fact we recommended business expenses cover.
  • Business Expenses – The same level of cover.
  • Income Protection – approximately $5,000 pm more cover each.
  • Life/TPD– A slightly greater level of Life/TPD.
  • Trauma – Trauma cover of $300K for both. One partner originally had none and it was a reduction for the other partner of $46K.
  • Level premiums have a ‘to 65 saving’ of approximately $688,000.
  • The total net cost of their current cover was $10,355.
  • The total net cost of our proposed cover was $22,721.

The outcome, in this case, is considerably more cover overall, which is aligned to their need.

We had also recommended that all policies be established on level premiums, leaving the clients with an expense they can effectively budget for in the years ahead, rather than finding the cover becomes unaffordable when they are most likely to need it.

In addition to this, we referred these clients to a solicitor specialising in business partnership agreements and buy/sell agreements. There were two meetings with the solicitor. We participated in the first handover and worked with the solicitor ongoing from there to help make it a simple process for all involved.

They now have a well-considered business partnership agreement and buy/sell agreement in place, along with more appropriate cover for their needs that will continue to be a manageable cost into the future.

Produced With Our Clients Permission

Important Note
The content of this case study has been based on a real-life client. Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.
Share this post:
FacebookLinkedInGmail
Testimonials

What Our Clients Say

We have entrusted our wealth creation and future security with Yield Financial Planning for a number of years now. They truly are professionals who have stayed ahead of the game by making strategic decisions at the right time and have always given sound advice. Security for our future is in great hands. Thanks Yield Financial Planning!!!

Yield Financial Planning have been excellent in their advice and investment strategies being a pleasure to work with over many years. Their strategies and constant portfolio reviews making changes when needed have guided us right through from our working days, the GFC and now retirement. We hold Yield as being an invaluable necessity.

Yield Financial Planning has provided us with professional expert sound advice. It is always a pleasure to deal James and his team who always have our best interests at heart and has set up a sound plan for retirement. James and his team have provided first rate advice and funds management. I have confidence in James’s competence and integrity.

Just the excellent service we receive and doesn’t matter how many questions we have; the staff are happy to oblige. They follow things through and let us think about important and critical matters methodically with a helping hand along the way. So overall the Journey is pleasant, professional and comprehensive yet it is explained to you what could help you or your needs.

I’ve been with Yield for more than 10 years and I’ve found the advice invaluable in helping to navigate life’s twists and turns. Highly recommended 5 Stars!

I would like to congratulate Yield Financial Planning, for their high quality of care, expertise and knowledge they have provided in ensuring my future growth is heading in the right direction. These qualities have reflected both in results and the ongoing follow up as an existing client, which I find reassuring.

Have been with Yield for a few years as my financial planners, and was very pleased when they announced their Mortgage Brokering Services – their Broker had great communication, and at no time was I unsure of where we were in the process. Being my Financial Planner, I was much more comfortable knowing they had my interests at the forefront of all negotiations – rather than getting a mortgage broker off the street who is probably aligned with a bank. From a more financial perspective, Yield saved us over $5000 per year through reduced interest payments alone – I highly recommend looking into Yield Financial

Penny O’Grady & Trevor Shevchenko
Kevin & Anne Kennelly
Renae Chapman & Tim Walsh
Ken & Frances Moore
Tim Prosser
Angela Henwood
Wade Lamberth & Narges Bayat
decoration leaves 1
decoration leaves 1
decoration leaves 1
decoration leaves 2
decoration leaves 2

Get In Touch

Interested to discuss something?
Have a question or comment?
Submit your details and we’ll be in touch.

Free Consultation

Free Consultation

Get started with your free strategy consultation and receive a copy of the MOST IN DEMAND Good Fortune Guide – written by Certified Financial Planner of the year 2020 national finalist, to help educate you on your financial plan.