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Thread: Key man insurance workaround

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    Key man insurance workaround

    So about 18 months ago we upped our insurance after a nasty incident with a Mercedes that someone crashed into....wait, that's another story. At the same time me and my two partners (brother and sister) decided to take out key-man insurance. Basically what it entails (for those that do not know):

    If I die, my shares automatically goes to my wife. If he dies, his goes to his son and daughter. If she dies it goes to her husband. This basically insures each other's life for the value of the shares, so the company can buy back the shares from the deceased's family. Seeing that I don't want any of their families involved in the business and I know the feeling is mutual.

    The problem has risen that in our current climate, overheads has increased (since Feb 2013 to Feb 2018) by R140k pm while GP has only gone up R90k pm. So I need to start cutting costs (I know...I know, insurance is a dangerous place to start, the situation is dire) Insurance is up by R9k per month in the same periods

    Our keyman insurance is obviously quite costly because of our collective BMI's (another thread altogether) and one of us smokes (not me).

    What I was thinking (mods, apologies if this should be in the legal section): If I leave the shares to my partners in my testament, and if I get a binding contract transcending death (tricky, right?) that they will pay an amount of say R10k/month to my family until the value of the shares has been met, could that work?

    How do/did you handle the same kind of situation in your business'?

    p.s. This is obviously not the only place we will be cutting back...

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    Quote Originally Posted by Hannes Botha View Post
    What I was thinking (mods, apologies if this should be in the legal section): If I leave the shares to my partners in my testament, and if I get a binding contract transcending death (tricky, right?) that they will pay an amount of say R10k/month to my family until the value of the shares has been met, could that work?
    And if they don't pay?
    And if there is an argument about the value?
    And if management and the fortunes of the business takes a change in direction?
    And if the wind blows from the North instead of the East as expected?
    The trouble with opportunity is it normally comes dressed up as work.

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