Forward Planning: Different ways to protect business and employees

Business in-surance planning is intended to help company owners - regardless of the business size - to identify their insurance needs from the life, medical, and pension angles and find the right solutions to protect the business itself, its owners, their heirs, the employees and to guarantee that business continuity.

Business continuation: Bus-iness owners face three risks: death, disability and retirement.

Following these events, the business must either continue, get sold or be liquidated. Planning will ensure the providing of successor management, getting a satisfactory return on the business capital or even continuation of the family involvement in the business.

If there is more than one owner, Cross Purchase Agreement becomes one of the means for complete disposition of the business interests. Both partners buy an insurance policy on each other, with a death benefit equal to the partners respective interest, where each partner is the beneficiary and owner of the policy.

During the lifetime, each partner accumulates funds into the policy which can be applied toward buying the other's interest. In case of death of one of the partners, the proceeds and death benefits of his/her insurance policy will go to the heirs while the other owner can keep the business by acquiring his/her deceased partner's share.

This type of planning preserves both business and family interests, preventing court cases, legal disputes and at the same time guarantying business continuation. This planning usually involves a certified accountant and an insurance and estate attorney, beside a financial planner or certified insurance consultant/agent.

Employee benefits: Employee benefits are becoming more and more an essential part of employee compensation packages. Large and even medium sized employers in the UAE understand this important mechanism and provide their employees (actually, the businesses most valuable asset) with group life, medical insurance and company pension plan.

Nowadays quality employees are no longer looking for a salary only but for a whole compensation package as well. Employee benefits consist of group life insurance, which provides protection for the employee and his family in case of death and disability due to accident or sickness (work related or not).

If the employee dies, the benefit goes to his family providing income replacement. If he becomes disabled due to an accident or sickness, either short or long term disability benefits or a lump sum amount will be paid to the employee allowing him to have an income while he is disabled.

The UAE labour law provides only against work related injuries and the disability income equal to the employee's full salary run for six months, thereafter reduced to one-half of the salary for an additional six months period.

Employers tend not to keep a disabled employee on the payroll more than six months. This type of insurance is very important for job security and long term employment guarantee.

Medical expenses: Group medical insurance provides the employees with access to private quality health care. It provides for out- as well as in-patient hospital treatment.

The employee has the right to select the hospital, clinic or doctor of his/her choice. Quality medical treatment leads to speedy recovery and prevents further medical complications.

Key person: All businesses have an individual, which the business depends mostly upon for his/her abilities to run it successfully. An insurance policy is bought on this key person by the business.

If this key person dies the business uses the life insurance proceeds to pay this key man's beneficiary or/and uses it to find and hire a successor to this key person.

Group pension: Employers are faced with labour law requirements for end of service benefits and employees generally hardly save on their own. A company pension plan enables all the employees to provide for their future pension and retirement and can be tailor-made to meet specific conditions and requirements.

Never forget - a financially secure employee is a happy employee, and therefore loyal and more productive.

The author is managing director of Gulf Insurance Consulting and a licensed insurance consultant and financial planner.