Elevator Business Continuation Insurance

For many small- and medium-sized businesses, business continuation insurance serves as a useful element of succession planning and can be a vitally important part of a business continuity plan. Usually consisting of life and disability policies structured to meet the business continuity needs of the owners of a business, should a partner die or become unable to participate in a company’s ongoing operations, these policies are payable per the terms of an ownership transition contract – typically either a buy-sell, cross-purchase or entity purchase agreement. Elevator business continuation insurance is a risk management strategy that enables remaining business partners to move forward.

What is Business Continuation Insurance? 

Business continuation insurance is a type of life and disability insurance that covers losses if a key executive, business owner, or partner dies or becomes disabled. It provides funds to minimize disruption and keep the business running. It also supports a specific succession strategy in the event of losing a key employee. 

Types of Business Continuation Insurance 

• Entity-purchase Policy: The business itself is the beneficiary of the policy. 

• Cross-purchase Policy: Covers individual business owners and partners, who receive benefits directly under the policy terms. 

Benefits of Business Continuation Insurance 

Here’s how business continuation insurance becomes beneficial to your elevator business: 

1. Ownership Transition Stability 

For businesses with two or more partners, a buy-sell agreement ensures that proceeds from the insurance policy are used appropriately. Life insurance policies cover the risk of an owner’s death, while disability income insurance protects against disability. 

2. Avoiding Potential Conflicts 

This insurance helps mitigate financial stress and loss of leadership following the death or disability of an owner or partner. It should be a part of your long-term planning. 

Mitigating Risks with Elevator Business Continuation Insurance 

The death or disablement of a key executive can cause stress and financial difficulties. Without clear leadership, the business might fail. Business continuation insurance, combining life and disability insurance, allows other partners to plan ahead. They can acquire the impaired executive’s share without conflict or misunderstandings over leadership. 

Combined with clear buy-sell agreements, this insurance helps businesses with multiple owners maintain an orderly succession strategy. It ensures that the portion of the business owned by one person can be purchased by other partners. Otherwise, ownership might pass to the deceased executive’s heirs.

Primary Business Continuation Insurance Vehicles 

The main insurance types used in buy-sell agreements are: 

• Term Life Insurance: Covers an insured business owner for a set number of years. The policy’s value matches the agreed-upon value of the owner’s share and is used to buy out the deceased person’s heirs. 

• Permanent Life Insurance: Includes whole, universal, or variable life insurance. It provides a death benefit and a cash value element if the policyholder wishes to cash out. 

• Disability Buyout Insurance: Provides a cash benefit in case of a business owner’s disability, allowing remaining partners to buy out their interest. 

Note: These policies can name specific individuals or the business itself as beneficiaries. They can cover losses for any vital person in the business, not just owners.

Elevator Entrepreneurs are Encouraged to Have a Business Continuation Plan 

When unforeseen events occur to those who’ve become invaluable to your business, the company can suddenly become extremely difficult to operate without a solid plan. Especially when you have multiple stakeholders, you can imagine how complex the financial aspects become. Business continuity insurance should be in place from the start, not as an afterthought. Having the necessary insurance ensures the business can continue with minimal disruption if a key player is lost.