Business Continuation Insurance

Business continuation insurance is a policy that a business will take out on the lives of employees or individuals associated with the company whose death would seriously impact the business’s ability to continue operations. It could be an insurance policy on either male or female lives and is usually taken out on those who play a role in the essential management, marketing, financial or legal expertise within the company.

The principle behind business continuation insurance is to replace any economic losses the business could sustain as a result of the death of one or more of these persons. It usually includes clauses related to ownership buyouts or transfers and for various situations involving estates and beneficiaries. There is permanent insurance on the life of the named insured people, which means they are covered for life and not for a specific period of time.

The premiums for this type of business insurance must be paid as long as the insurance is in effect and there are various costs involved. The cost of the premiums depend on the health condition of the insured, whether or not he/she smokes or consumes alcohol and, of course, the amount of the life insurance. There is quite an extensive medical questionnaire that has to be completed and a physical by a doctor will be required. However, once a policy is in place, there will not be any further questionnaires or examinations needed.

In such business continuation policies a portion of the premium is paid into a value tax cash accumulation account. The company also issues dividends, which are also paid into this account. There must be a named insurer, a named insured and designated beneficiaries. Although these three names can be the same person, this is usually not the case. The insurer is usually someone of importance within the company who has a vested interest in ensuring that the company continues in operation.