Business Partnership Insurance for a Couple
Background: Meet Angie & Larry
Larry and Angie are business partners running a successful enterprise generating between $800,000 and $1.6 million in annual profit. Over the years, they had built a valuable business, but their underlying structures and protection strategies had not kept pace with their growth.
They had an outdated partnership agreement, insurance policies that hadn’t been reviewed in years, and no formal buy/sell agreement in place. More importantly, they had never clearly defined what should happen to the business if one of them were to pass away, become disabled, or step away from the business.
Key Results at a Glance
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Business Planning :Business partnership agreement put in place
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Cover increase :Strengthened Life/TPD to fully fund a business buyout.
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Low cost :Premium saving of approx. $688K to age 65
Why Did They Seek Advice?
- To understand the value of their business and what it meant for their financial planning.
- To determine what would happen if one partner became disabled or passed away.
- To ensure the business could continue operating smoothly under unexpected circumstances.
- To review whether their existing insurance cover was adequate and cost-effective.
- To establish a clear and legally supported business succession plan.
Business Succession & Buy/Sell Planning:
- Facilitated detailed discussions around potential scenarios including death, disability, and partial incapacity.
- Identified 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.
- Referred Larry and Angie to a specialist solicitor to establish a formal partnership agreement and buy/sell agreement.
- Collaborated with the solicitor to ensure financial and legal strategies were aligned.
Insurance Review:
- Conducted a detailed comparison of their existing cover against their actual needs, identifying that overall coverage levels were significantly misaligned.
- Found that their insurance was not only insufficient in key areas but also unnecessarily expensive and poorly structured.
- Identified that Life/TPD held personally was only $112,000, despite an estimated $1.6 million business value, and was being funded from after-tax income.
- Noted that company-owned Life/TPD cover of $1,050,000 exceeded their actual business needs, resulting in inefficient structuring.
- Confirmed that business expenses cover of $23,000 per month for 12 months was appropriate but overpriced compared to market alternatives.
- Identified that personal insurance cover levels were low and not strategically aligned to their financial position or risk exposure.
- Found that all policies were on stepped premiums, increasing the risk of affordability issues over time.
Insurance Strategy:
- Increased Life/TPD cover significantly to ensure sufficient funding for a business buyout.
- Reduced unnecessary or excessive cover within company-owned policies to better match actual requirements.
- Increased Income Protection cover by approximately $5,000 per month per partner.
- Introduced Trauma cover of $300,000 each, where previously one partner had no cover.
- Maintained appropriate Business Expenses cover while improving cost efficiency.
- Transitioned all policies to level premiums, ensuring long-term affordability and cost certainty.
Outcomes and Benefits
- Increased Life/TPD cover by approximately $988,000 to properly fund a business buyout.
- Reduced unnecessary company-owned Life/TPD cover by $50,000 (Life) and $300,000 (TPD).
- Increased Income Protection cover by approximately $5,000 per month per partner.
- Introduced $300,000 Trauma cover for each partner, improving overall protection.
- Achieved a long-term premium saving of approximately $688,000 to age 65 through level premiums.
- Reduced inefficiencies and improved alignment of all insurance cover with actual needs.
- Established a formal partnership and buy/sell agreement, ensuring business continuity and clarity.
- Created a structured and manageable insurance cost framework for the future.
Key Takeaway
When business success grows, your protection strategies need to grow with it. Larry and Angie’s story shows how reviewing outdated agreements and insurance structures can uncover critical gaps and opportunities. Through tailored advice, they were able to protect their business, secure their financial future, and put clear plans in place for whatever may come next
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Important Note
Produced with our client’s permission. Names within this case study have been changed to protect the client’s right to privacy. 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.
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