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If
a partner dies
or becomes critically
ill, the life
insurance policy
pays out to
the surviving
partners so
that they have
the funds to
buy out the
deceased/ill
partner's interest.
A
Partner's interest
is based on
their value
of the assets
of the business.
If there is
no Partnership
Agreement in
place and one
partner dies,
then the Partnership
can dissolve
(the first partner's
share would
pass to their
estate who may
have no interest
or knowledge
in running the
business). In
most cases the
estate would
want their share
of the capital
which could
force the business
to fold.
If the beneficiaires
decided that
they did want
to have an interest
in running the
business; the
surviving partner/s
might not want
to work with
someone who
draws profits
from the business
but is not able
to contribute
to its profits
as much as the
previous partner.
The
surviving partners
could try to
borrow the
funds from
a lender if
Partnership
Protection was
not in place
but most underwriters
would factor
in the loss
of a partner
who may have
been key to
the business's
profits and
thus may be
unwilling
to lend in
some circumstances.
If
you run a partnership
business you
cannot afford
to be without
partnership
protection.
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