Business Continuation Insurance
What Does Business Continuation Insurance Mean?
Business continuation insurance is designed to protect a business from the financial impact of the death or disability of a partner, supporting business succession planning. Typically consisting of life and disability insurance policies, the coverage is structured based on the terms of the ownership transfer, which may be set up as a buy-sell agreement, cross-purchase agreement, or entity purchase plan.
Insuranceopedia Explains Business Continuation Insurance
Business continuation insurance is a risk management strategy that enables a company to continue operating despite the loss of a key person. It helps mitigate the financial impact and the stress caused by the sudden absence of leadership. Additionally, it establishes a clear agreement to ensure smooth business succession, preventing potential power struggles, misunderstandings, or conflicts in the future.
The disability insurance portion of the policy is often overlooked, but it matters just as much as the life insurance component, since a partner who becomes permanently disabled can no longer contribute to operations yet still retains an ownership stake. Business continuation insurance is one of several types of business insurance that owners should consider when setting up or reviewing a succession plan.