PMS Business
Partnership Protection Insurance
Help protect the continuity and ownership of a partnership if a partner dies or suffers a covered critical illness. The right structure depends on how your partnership is set up.
What is Partnership Protection Insurance
Partnership Protection is life, or life and critical illness, cover arranged so that the remaining partners have money to buy the share of a partner who dies or becomes critically ill, paying that partner or their family a fair value.
What may happen if a partner dies
Depending on the partnership agreement, a death can mean the partner's share has to be paid out, and in some cases a traditional partnership may be dissolved. Without funds in place, the remaining partners may need to borrow or sell assets to pay the estate.
How Partnership Protection works
Each partner is insured for the value of their interest. Policies are often written in trust for the other partners, so the money reaches the people buying the share. The partnership agreement, or a separate agreement, sets out how the purchase takes place.
Who should consider the cover
Professional practices such as accountants, solicitors, surveyors and medical practices, and trading partnerships where the partners want the business to continue if one of them dies or is seriously ill.
The right arrangement depends on whether you are a traditional partnership, a limited liability partnership (LLP) or another structure, and on what your current agreement says.
Valuing each partner's interest
Cover is based on what each partner's share is worth, which may include capital, goodwill and current account balances depending on your agreement. Your accountant can help agree the basis.
Life cover and critical illness options
Life cover deals with death; adding critical illness can provide money if a partner is diagnosed with a covered condition and leaves the partnership. Covered conditions and definitions vary between insurers.
Partnership agreements and legal advice
We advise on the insurance only. Your partnership agreement — and any cross-option agreement — should be prepared or reviewed by a solicitor, and we will work with them so the policies and the agreement fit together.
Protecting the remaining partners
With money in place, the remaining partners can buy the share without borrowing or selling assets, and keep the practice running for clients and staff.
Providing value for the affected partner's family
The partner, or their family, can receive the value of their share in cash rather than waiting for the partnership to find the money or being tied into a business they do not run.
Potential benefits and important considerations
Benefits
- Continuity for clients, staff and the remaining partners
- A fair, agreed value for the departing partner or their family
- Avoids the need to borrow or sell assets at a difficult time
Things to consider
- The structure depends on your partnership type and agreement
- Legal advice on the agreement is separate from our insurance advice
- Cover should be reviewed when partners join, leave or values change
How it works
How we approach partnership protection
Built around your partnership agreement, with your solicitor and accountant involved.
- 01
Understand your partnership
We review how the partnership is structured and what happens under your current agreement.
Structure and gaps understood - 02
Design the cover
We recommend amounts, policy ownership and trust arrangements for each partner.
Cover designed around the agreement - 03
Put it in place together
We arrange the cover alongside your solicitor's work on the agreement, then review it as the partnership changes.
Policies and agreement aligned
Ready to take the first step?
Your initial consultation is without obligation. Speak with an adviser in Croydon or over Zoom.
Partnership Protection FAQs
The principles are similar, but an LLP is a separate legal entity and the members' agreement will shape how cover should be set up. We look at your structure before recommending anything.
Possibly. Many agreements do not deal with funding a buy-out. Your solicitor can advise; we will explain what the insurance needs to work.
The new partner should be added and the amounts reviewed so everyone is covered for the current value of their share.
Usually the remaining partners, through a trust, so they can buy the share. The exact arrangement depends on the policies and agreement.
Related PMS Business services
Arrange a Partnership Protection review
Speak to us about your business. Your first conversation is without obligation.
Important information
We do not give legal advice. Any shareholder, cross-option or partnership agreement should be prepared or reviewed by a solicitor. An insurance policy does not transfer ownership of shares or a partnership interest by itself.
Tax treatment depends on individual and business circumstances and may change. We do not give tax advice; please speak to your accountant or tax adviser. The Financial Conduct Authority does not regulate tax advice.
Trusts and taxation are not regulated by the Financial Conduct Authority.
Covered conditions, definitions, exclusions and any survival period vary between insurers and policies. A claim is paid only if the policy definition is met.
Before you proceed we will confirm in writing whether PMS Mortgages advises on and arranges this cover, or introduces you to another firm, and what that firm's role is.