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Welcome: Site Map: Adviser Updates: Publications and Documents:
Business Succession Planning: Need for Asset or Buy/Sell Strategy Need for Liability or Key Person Strategy
Simple Succession Plan:
Complete Succession Plan:
One Page Strategy: Simplifying the Valuation Issue
Multiple Policy Approach:
One Page, Two Policy Strategy:
Other Issues:
Sole Proprietors and Families: Third Party Buy/Sell Strategies Estate Equalisation Strategies
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Apportionment of Premiums
One Policy Strategy The One Policy Strategy aggregates Cover onto One Policy. As a result, instead of having multiple Premiums for multiple Policies, there will be one premium for the One Policy. However, this does not mean that the Business should pay the whole Premium. In particular, it does not mean that the Business is responsible for payment of the Life Insured's Personal Premiums. Apportionment Between Needs The apportionment of the Premium between the different Needs is a simple mathematical process. The Premium payable with respect to each component of the total Sum Insured will be a part of the Premium proportionate to the part of the total Sum Insured. Example For example, if the Personal Cover is 50% of the total Sum Insured, the Personal Premium will be 50% of the total Premium.
Recommended Apportionment Between Parties It is recommended that the total Premium cost of the Policies be split in the following manner:
In cases where a Superannuation Fund is the Legal Owner, Beneficial Owner or Recipient of any of the Cover, it will be responsible for its proportionate share of the Premium otherwise payable by the Life Insured.
Complete Succession Plan Click here to see a summary of the apportionment and deductibility of the Premiums payable with respect to a Complete Succession Plan.
One Page, Two Policy Strategy If the Business is concerned about the administrative burden of working out the split, the One Page, Two Policy Strategy provides two alternative strategies. Two Policies, Same Ownership, Different Payers The Business could split the Cover into two Policies, both of which could be owned by the Business as Trustee. The Life Insured could be identified as the Payer of the Premium with respect to the Personal Policy, so that the Insurance Company deducted the Personal Premium from the Life Insured directly (rather than indirectly through the Business). Two Policies, Different Ownership, Different Payers Alternatively, if the Business required the Buy/Sell and Personal Cover to be Self-Owned, the Policy Owner and Payer could be the Life Insured. Apportionment of Insurance Proceeds In both cases, the Agreement would still pool the total of the Insurance Proceeds and determine how they would be split.
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Adviser Tip The One Policy Strategy "aggregates" Premiums that would otherwise have been separate. When the responsibility for payment of the Premium is calculated, you can "segregate" or split the total Premium proportionately to the amount of each component of the Sum Insured.
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