Key person insurance: cash when you need to act.
Key person insurance in Australia, plus funding a partner buyout and protecting a partnership. The point of business cover is simple: when something happens, the remaining owners have money to act with instead of a scramble and a fire sale.
What this actually protects.
Personal cover looks after your family. Business cover looks after the business, your partners, and the value you have built into it. Without it, a death or a permanent disability can force a sale at the worst imaginable time. The personal side (life, TPD, and income protection) still has to be there underneath it.
- +The money follows people
Most businesses have one or two people carrying the relationships, the know-how or the sales. Replacing them takes months and costs a fortune.
- +Your money is stuck in it
Most owners have the bulk of their wealth locked inside the business. This cover turns that into cash at the moment it is needed.
- +You have signed personal guarantees
Nearly every business loan needs one. Cover should be big enough to clear them if the person who signed is gone.
- +Succession does not sort itself out
Without a funded agreement, it becomes a negotiation between a grieving spouse and some very busy partners. Nobody wants that conversation.
Six kinds of cover.
Business cover is hardly ever one policy. It is a handful of them, each sized against a particular thing that could go wrong inside the business.
Key person revenue cover
Covers the income the business loses when someone it depends on is gone. The money pays for finding a replacement and riding out the gap.
Replacing what they put in
Covers the money a key person actually has in the business — loans they have made to it, and guarantees they have signed for it.
Buying out a departing owner
Life, TPD and trauma cover sized so the remaining owners can buy out someone's share — under an agreement a solicitor has actually drafted.
Protecting the partnership
So the remaining partners can buy the share without selling the business or borrowing money in a hurry on bad terms.
Keeping the lights on
Pays the fixed bills if the owner is off sick or injured — rent, power, staff wages, lease payments. They don't stop just because you have.
Clearing personal guarantees
Most business loans are personally guaranteed. This clears them if the person who signed dies or can never work again.
How a funded buyout works.
The legal agreement and the insurance have to be built together. The agreement says what triggers a buyout; the insurance pays for it. Medical practices carry their own traps here, which we go through on the page on cover for doctors.
Valuing it
Agree how each owner's share gets valued. Revisit it yearly so the number does not go stale.
The agreement
Your solicitor drafts it — what triggers a buyout, how it is valued, and how it gets paid.
The cover
Life, TPD and trauma policies put in place, held in whichever name matches the agreement.
If it happens
The policy pays, the agreement does what it says, and the remaining owners end up in full control.
We work with your other advisers.
This sits across legal, accounting and financial advice at once. We work with the solicitor and accountant you already have rather than asking you to start again with people we prefer.
- +Your solicitor
Writes and updates the agreement. We give them the policy details so the two line up.
- +Your accountant
Sets how the business gets valued, and confirms the tax treatment for your particular setup.
- +Your business banker
Knows what you have personally guaranteed. Cover big enough to clear it is part of the job.
- +You and your partners
The conversation everyone puts off. We sit in the middle of it so the agreement ends up matching what each of you actually wants.
Who you're dealing with.
- Your adviser
- Balki Balakrishnan
- Experience
- 12+ years on personal and business cover
- Member of
- FAAA
- Authorised as
- AR 409415 of La Verne Capital Pty Ltd
- Focus
- Owner-managed businesses and professional practices
- On its own?
- Yes — we will review cover without a full plan
Business cover sits alongside the four personal covers we arrange most often: income protection, TPD, trauma, and life. Recommendations require personal advice and sit inside the financial planning licence.
The questions owners ask before booking.
Anyone whose absence would visibly hurt the money coming in, the ability to borrow, or the day-to-day running of the place. Founders, the person who brings in the work, the one who knows how everything actually functions. The test is simple: would you feel it in dollars?
It's an agreement between the owners that kicks in if one of them dies, is permanently disabled, or is diagnosed with something serious. The insurance pays for the buyout, so the remaining owners can pay out the person or their family without selling the business to do it. The legal document and the policies have to match exactly — that is where most of these fall over.
It depends how the business is set up. Each owner holding their own, owners holding each other's, or a trust holding the lot — all have different tax and stamp duty consequences. We settle that with your accountant and solicitor before anything is put in place.
Sometimes. Cover held to replace lost income can often be claimed by the business. Cover held to replace capital generally can't — but then the payout usually isn't taxed either. It all comes down to how it is set up, and we work through it with your accountant rather than guessing.
Once a year at minimum, and any time something big changes what the business is worth or who owns it. A new partner, a new loan, winning a major contract, or restructuring can all move the number.
The other covers
- All personal risk coverBusiness cover in context with the four personal covers we advise on.
- Income protection insuranceMonthly benefit for the owner if illness or injury keeps them out of the business.
- TPD insuranceLump sum if an owner can never return to work. A core buy and sell trigger.
- Trauma insuranceCritical illness lump sum on diagnosis. Used in trauma-triggered buyouts.
- Life insuranceLump sum on death or terminal illness. The foundation of most buy and sell funding.
- Insurance for doctorsPractice-owner cover and partnership protection for medical professionals.
Information on this page is general in nature. It does not take into account your personal objectives, financial situation, or needs. Read the relevant Product Disclosure Statement and consider whether personal advice is appropriate before acquiring any insurance product mentioned here.
Book a free business cover review.
An hour on the file with you and, if useful, your accountant and solicitor. We will tell you what is funded, what is not, and what to do about it.