A Small-Business Owner’s insurance policy in case of unexpected incapacitation

Two things are certain in life: taxes and death. With regards to the latter, we use life insurance to provide financial support for our spouse, and a last will to document the preferred arrangements regarding children and estate.

However, if something bad happens to a small-business owner, what does this mean for the company, the employees and the surviving spouse?

–       Can employees and vendors be paid?

–       Can critical (bank, internet and other) accounts be accessed?

–       Can vehicles be legally driven?

–       Does somebody have contact information for key partners (lawyers, accountants, shareholders)?

–       Is someone aware of the owner’s business agreements and liabilities?

–       Is the management team able to run the business?

If these and many other issues have not been dealt with in advance, it may well result in the business having to close, with all kinds of unintended and undesirable consequences.

Case in point, a relative of mine in The Netherlands described a sad example: a client of the law firm where she works owned a successful company with 150 employees when he suddenly passed away. The “management team” tried to keep things afloat, but needed a loan to continue. The bank assessed the team and the situation and rejected the loan application. Result: the company got sold for pennies on the dollar, all personnel got laid off and only 50% rehired by the new owner. Hence, the ultimate outcome was that 75 people lost their job and the widow got a pittance for a company that should have been worth much more, possibly affecting her retirement.


The above described problem can be mitigated by preparing a “Business Continuity Plan”.

This can be a simple document that lists everything of importance for the relevant stakeholders to continue the business in case of permanent or temporary incapacitation of the owner. This includes information critical to running the business (refer to the bulleted list above), but may also contain instructions not addressed in the owner’s will, business-deals-in-progress, details of life and other insurance policies, ideas for strategic moves etc.

Creating a Continuity Plan is not rocket science, nevertheless, from discussions I’ve had with various professionals, it seems like only a small minority of small-business owners have such a plan in place, which is truly unfortunate.

To initiate the actual transition process immediately after disaster has struck, I highly recommend that small-business owners appoint a “Business Continuity Board”. This small team (comprising shareholders, select management team members and/or external trusted advisors) should take part in creating the Continuity Plan (or at least be familiar with its contents) and is dedicated to ensuring the continuity of the business until permanent arrangements are in place (for example appointing a new CEO, assisting with expedited succession, or selling the business).

Most owners will agree that they love their spouse and children, and that they deeply care about their employees and business partners. Preparing a Business Continuity Plan and appointing a Business Continuity Board is an effective way to turn that affection into a legacy, just in case disaster strikes.

Although the underlying concept is no different from arranging a will or buying life insurance, discussions around business continuity may at times feel somewhat morbid. However, having gone through the process with some of my clients, I can attest that it is an extremely rewarding experience to see the clarity and reassurance that such a Continuity Plan provides.


Two things are for sure in life: taxes and death. If the latter happens unexpectedly to a business owner, this can result in closure of the business, employees losing their jobs and the surviving spouse losing his/her future retirement income. A way to prevent this from happening is to develop a Business Continuity Plan and appoint a Business Continuity Board.

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