I have worked in the financial-services industry for more than four decades. During that time, I have seen how easily business owners postpone business assurance. It feels less urgent than finding clients, paying salaries or managing cash flow. Unfortunately, death, disability and serious illness do not wait until the paperwork is convenient.
The following three stories are real, although identifying details have been removed. Each one involved a different kind of dependency. Together, they show that business assurance is not only about two partners taking life cover on one another. It is about identifying the people, ownership interests and responsibilities without which a business may not continue.
A business can be successful on Friday and face a crisis by Monday.
The restaurant whose reputation depended on one chef
I was newly married and very young when this happened. I was already working in insurance, although I was not yet a financial adviser.
A neighbour owned a popular restaurant. Much of that popularity rested on the skill and reputation of one exceptional chef. Customers returned because they knew the quality of the food they would receive.
One night, after the restaurant had closed, the chef was involved in a terrible accident on the way home. He spent approximately nine months in hospital.
The owner tried to carry on. However, he could not find another chef who could reproduce the same standard or attract the same clientele. Gradually, the restaurant lost the very thing that had made it successful. After about nine months, it closed.
The key person in this story was not the owner. He was an employee whose talent, knowledge and reputation were central to the business.
What this example teaches us
Insurance could not have recreated that chef’s skill. Appropriate planning and correctly structured key-person cover might, however, have provided money and time to recruit a replacement, train someone, change the restaurant’s offering, market a new chef or meet expenses while the owner restructured the business.
Depending on the policy, the relevant risks might include death, disability, severe illness or another defined incapacity. The actual benefits and exclusions must always be checked.
The important question is simple: If one employee could not work from tomorrow, would the business merely be inconvenienced—or would its income and reputation be seriously threatened?
The sole owner of 13 companies
Years later, I met a new client at his home. He told me that he was the sole owner of 13 companies. His two young daughters, both in their twenties, worked in his main company.
Despite the size of his business interests, he did not have a properly structured will or adequate continuity arrangements. Over the following weeks, I helped coordinate the process of getting an appropriate will in place through the relevant professionals and arranging sufficient life cover for his spouse.
On the Monday after the Easter weekend that same year, he was killed in a car accident while driving home.
His daughters had to step into an enormous responsibility with very little warning. Thankfully, the will had been put in place and the daughters already knew something about the main company. Even so, his wife struggled terribly to stay on top of everything.
This case stayed with me because it shows that a sole owner also has a business-assurance problem. There may be no co-owner to buy the deceased person’s interest, no obvious successor and no one with all the knowledge or authority that the founder carried.
Questions every sole owner should consider
Life cover for a spouse is important, but it does not by itself answer questions such as:
- Who can make decisions immediately?
- Who knows the banking, supplier, client and staffing arrangements?
- Can the business continue while the estate is being administered?
- Is there enough liquidity for personal and business needs?
- Is there a capable successor, manager or buyer?
- Do the will, shareholder records, company documents and continuity plan agree with one another?
Some sole owners may explore a formal continuity or purchase arrangement with a suitable person in the same industry. That is not a do-it-yourself solution. The commercial relationship, insurable interest, valuation, ownership, agreement, tax treatment and estate-planning consequences require individual legal, tax and financial advice.
The partner who could not afford to buy the deceased's share
In another case, two directors started a small business together. It began with virtually no value and expanded remarkably quickly. Within only a year, the business was worth several million rand.
They had not put properly funded partnership or buy-and-sell assurance in place.
One partner died suddenly from a heart attack. The surviving partner could not raise enough money to purchase the deceased partner’s share from the estate. Six months later, the business closed its doors.
This is one of the reasons a buy-and-sell agreement and its funding should not be treated as a once-off exercise. Even if the arrangement had been based on the business’s starting value, rapid growth would soon have made the original amount inadequate.
A written agreement without sufficient funding may leave the survivor unable to perform. Insurance without a properly drafted agreement may leave uncertainty about what the proceeds are meant to do. Both the agreement and the funding need to be reviewed as the business changes.
What these three businesses had in common
The restaurant relied on a key employee. The group of companies relied on its sole owner. The third business relied on two partners and had no affordable way to transfer the deceased partner’s interest.
Different structures; the same underlying risk: too much of the business depended on one person, and there was no complete, funded plan for that person’s sudden absence.
Business-assurance planning may need to consider:
- Key-person risk: The financial effect of losing someone whose skill, relationships, reputation or knowledge materially contributes to the business.
- Ownership succession: What happens to a business interest when an owner dies, becomes disabled, retires or leaves.
- Buy-and-sell funding: How a surviving owner will pay for the departing or deceased owner’s interest.
- Family protection: How dependants will be supported without forcing them to operate or sell a business under pressure.
- Operational continuity: Who has the authority, information and access needed to keep the business running.
- Regular valuation and review: Whether the agreement and cover still reflect the business’s current value and circumstances.
No single policy answers all these questions.
Why the structure and tax treatment matter in South Africa
Business assurance is a specialist area. The name on the policy, the purpose for which it was taken out, who owns it, who pays or bears the premiums, the beneficiary, the wording of the agreement and the relationship between the parties can all matter.
For key-person policies, South African tax law distinguishes between arrangements in which premiums may qualify for a deduction and those in which they do not. The corresponding treatment of the proceeds can differ. It is therefore unsafe to assume that every premium is deductible or every payout will be tax-free.
Buy-and-sell arrangements have their own estate-duty requirements. SARS explains that a policy intended to fund the purchase of a deceased partner’s or co-shareholder’s interest must meet specific conditions for its proceeds to be excluded from the deceased estate.
Among other things, the required business relationship must still exist at death, the policy must have the required purpose, and the deceased must not have paid or borne the premiums. If the statutory requirements are not met, the proceeds may be included for estate-duty purposes.
This is why the financial adviser, accountant and attorney should work from the same plan. A policy, agreement, will and accounting treatment that contradict one another can create serious problems precisely when the family and business are least able to deal with them.
Why this field has always been close to my heart
Business assurance has always been a field very close to my heart because I have repeatedly seen the consequences of arrangements that were missing, outdated or not properly connected.
In one case involving a legal firm, life cover had been arranged at considerable cost on the life of a new partner. However, the new policy had not been properly integrated with the existing partners’ policies or the firm’s buy-and-sell arrangement. Having a policy in place did not, on its own, mean that the overall structure would achieve what the partners intended.
Business assurance should therefore not be filed away and forgotten. The business value and required cover should be reviewed at least annually. The entire arrangement should also be reviewed whenever a partner, shareholder or member joins, retires, dies or otherwise leaves; whenever ownership percentages change; and whenever the value or structure of the business changes materially.
The policies, premium payments, ownership details, beneficiaries, valuation method, buy-and-sell agreement, company records and estate plans must continue to support the same intended outcome. This review should be coordinated by appropriately qualified financial, accounting and legal professionals.
Questions worth taking to your professional team
These are discussion prompts, not a substitute for personal advice:
- Which people are genuinely critical to the business’s income or operation?
- What would the financial effect be if any of them died or could not work for an extended period?
- What should happen to each owner’s business interest on death, disability, retirement, or departure?
- Is there a signed buy-and-sell or succession agreement, and does it still reflect the owners’ intentions?
- When was the business last valued?
- Is the funding sufficient for the current value of the business?
- Who owns each policy, pays or bears each premium and receives each benefit—and does this match the purpose and agreements?
- Have the tax, estate-duty and legal consequences been checked by appropriately qualified professionals?
- Do the wills, company records and continuity plan support the same outcome?
- Who will keep the business operating during the first days and months of a crisis?
Preparation cannot remove the loss—but it can reduce the financial damage
The three stories above ended very differently from the way their owners would have hoped. In every case, the human loss or incapacity was difficult enough. The absence of a complete continuity plan added a second crisis for the business and family.
Business assurance cannot replace a gifted employee, a parent or a trusted partner. What it can do, when correctly designed and kept up to date, is create liquidity, time and choices.
The GFS Partnership Assurance and Buy-and-Sell Agreements – South Africa 2026 guide has been developed to help business owners understand the questions, documents and professional conversations involved. It is an educational guide—not a policy recommendation or a replacement for a qualified financial adviser, accountant, or attorney.
View the GFS Partnership Assurance and Buy-and-Sell Agreements guide
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Important: This article provides general educational information only. It is not financial, tax, accounting, insurance or legal advice. Business-assurance arrangements are specific to each business, and legislation and SARS practice may change. Obtain guidance from appropriately qualified South African professionals before acting or changing an existing arrangement.