Imagine a medical practice owned by four GP’s. They each have a significant financial stake in the practice and rely on its income for their livelihoods. They are concerned about the impact of a worst case scenario involving accident or illness on themselves and their spouses. Therefore they seek advice on Buy-Sell insurance as follows:
- Establish a Buy-Sell Agreement: The partners establish a buy-sell agreement that outlines what will happen to the ownership shares if one of them dies or becomes disabled. This agreement is legally binding and typically funded by life, trauma and total disability insurance policies
- Establish Insurance Policies: Each partner takes out risk insurance policies on themselves, with the other partners named as beneficiaries. The proceeds from these policies will be used to buy out the deceased or disabled partner’s share of the practice
- Triggering Event: Unfortunately, one of the Doctors unexpectedly passes away. As per the buy-sell agreement, the remaining partners will use the proceeds from his life insurance policy to buy out his share of the practice from his estate. This ensures that his family receives fair compensation for his share of the business
- Valuation: The buy-sell agreement also specifies how the value of the practice will be determined in the event of a triggering event. This would normally involve a third party appraisal to assess the practice’s fair market value
- Smooth Transition: With the funds from the insurance policy, the remaining partners can smoothly transition the ownership of the practice without financial strain. The deceased Doctor’s family receives the insurance proceeds as per the agreement, and the practice continues to operate without disruption
In this way, buy-sell insurance provides financial security and ensures the continuity of the medical practice in the face of unexpected events like death or disability of one of the partners. For more information about Buy-Sell insurance see our page wealth-protection and Zurich’s generic flyer: buy-sell.
We can offer expert advice based on decades of experience, and explore your options for risk insurance. Contact us to arrange an initial consultation to discuss your needs.
