Do Not Forget Insurance When Planning Your Exit

All business owners will one day exit their business – voluntarily or involuntarily.  Insurance is a vital tool for ensuring you are prepared for an involuntary exit due to death or disability. 

 

Two of our recent files at VSP involved a shareholder death.  Our valuation expertise was required in connection with a buyout of the surviving spouse’s equity interest.  Thankfully life insurance was in place to provide income replacement for the surviving family members and for purposes of funding the buyout.

 

Life insurance, disability insurance, critical illness and long-term care should be considered to ensure you are prepared for an involuntary exit due to death or disability.  As a business owner, do you have sufficient life insurance in place?  Does your insurance provider have the knowledge and experience to deal with the various tax and other issues relevant to business owners?

I recently sat down with Cory Budovitch from Independent Financial Concepts Group (www.ifcg.com) in Toronto, Ontario.  Cory has over two decades of experience working with business owners and incorporated professionals on insurance and exit planning issues.  Cory is also a member of the Million Dollar Roundtable, an international, independent association of less than 1 percent of the world’s life insurance and financial services professionals who demonstrate exceptional professional knowledge, strict ethical conduct and outstanding client service. 

 

I know that Cory takes great pride in his process and in developing a personal relationship with each and every one of his clients.  I was interested in Cory’s thoughts on the top four things a business owner should be aware of when it comes to using an insurance professional throughout the exit planning process.  According to Cory, an effective insurance professional should:

1. understand the process – your insurance professional should take the time to understand your current situation and your goals (personal, family and business).  He/she should walk you through the process in an intelligible fashion answering any questions you have along the way so you understand what to expect;
2. consider all options – your insurance professional should identify all of your options and work with you to ensure you make the best decision for you and your family.  Options may include: where to hold the insurance policy; what investment vehicles to use; and where and when to withdraw money and how it will be taxed;
3. put you first – your insurance professional should invest the time to understand you and put your needs and interests above all else.  He/she should have a long-term outlook and be willing to walk you through the process at your pace.  Being able to come up with creative solutions to your issues that will not put you at risk is also extremely important; and
4. conduct regular reviews – you should review the type of insurance and coverage with your insurance advisor at least annually.  Has your business increased in value?  Have you acquired a secondary residence, gone through a divorce, had a death in the family, had a new child or had a change in your health status?  If so, your insurance needs may have changed.

In addition to the above, Cory routinely collaborates with other professional advisors (e.g. accountant, tax & estate lawyer, business valuators, actuaries, etc.) as part of a business owner’s exit planning process.  According to Cory, "It is vital to have an insurance professional that can work well with other professionals.  Effective communication with the other professionals, especially the accountant, is critical to understanding how a particular strategy will ensure the business owner’s goals are met."

 

My time with Cory was very interesting.  Not only does Cory have the knowledge and experience to ensure business owners are prepared for an involuntary exit due to death or disability, but he also helps business owners extract money from their companies while reducing their taxes and earning a measurable return on their investments.

 

If you are looking for an insurance professional or want a second opinion on your insurance needs you can contact Cory at corybud@ifcg.com.  Relationship, integrity and trust are extremely important to Cory.  He is fully committed to his process and will take the time needed to understand you and your situation.

 

To determine if your current coverage is sufficient a business valuation may be required.  To find out the value of your business or to learn more about our VSP Exit Starter Program, contact us at www.vspltd.ca.