Partnership Insurance

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What is Partnership Insurance?

Partnership Insurance This is a specific kind of business protection insurance that can provide compensation to a business partnership. 

It is Life Insurance policy taken out to protect business owners. It enables you to put a safeguard in place to provide a lump sum payment should one of the partners die suddenly.

This lump sum is paid to the deceased next of kin and will cover their share of the partnership.

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Arranging Partnership Insurance is a very specific area of financial planning. At emero, our team of experienced advisors can guide you through the process.  Contact Our Team

partnership insurance

Why is Partnership Insurance important?

By not having Partnership Insurance in place, you could potentially jeopardise the future of the business and the livelihood of the remaining partners.

In many cases, a partner’s share of the business is their most important financial asset. Often, they are the breadwinners and the loss of this income can have a significant impact on those left behind.

However, a lack of planning and disregarding Partnership Insurance does not only affect the deceased partner’s family. It can have potentially serious ramifications for the remaining partners within the business.

The death of a partner has the potential to bring both financial and legal complications. The deceased estate may request an immediate capital sum or want control of the business.

why is partnership insurance important

Who needs Partnership Insurance?

Anyone who co-owns a business alongside partner(s) should consider Partnership Insurance. It will help alleviate potential financial headaches that may arise following the death of a partner.

Partnership Insurance is not specific to one particular industry. It can be applied across a multitude of industries and is rarely not relevant.

Having Partnership Insurance in place can provide compensation to the deceased estate while ensuring financial stability for the business and remaining partners.

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Below we have outlined the important aspects of Partnership Insurance.


Editorial Staff

Last Update: August 2022


Partnership Insurance is a specific type of business protection. It is designed to provide a lump sum allowing the deceased partners next-of-kin to purchase their share of the business.

Partnership Insurance can be used by businesses in any industry or sector. Having such a policy in place will help provide financial stability to both the business and the deceased’s family.

What are the benefits of Partnership Insurance?

A major benefit of Partnership Insurance is that it provides clarity. At a time that is likely to be stressful both emotionally and financially, anything providing structure is to be welcomed.

Some of the more specific benefits associated with Partnership Insurance are:

  • Security – Having Partnership Insurance in place means the surviving partners will have sufficient funds to pay the deceased estate.
  • Control – The surviving partner(s) will retain full control and rights over the organisation as they have the ability to immediately buy the deceased partners shareholding if they wish.
  • Peace of mind – The surviving partners will have peace of mind knowing they can retain control while the deceased estate also has peace of mind knowing plans are in place should something happen.
  • Freedom – Partnership Insurance comes in many shapes and sizes. Finding a plan and structure that best suits your business is vital.

Could your business cope without Partnership Insurance?

Should a partner die with no Partnership Insurance in place, it may have a significant impact on both the surviving partners and the business as a whole.

In some cases, the consequences can severely hurt the business financially. This can happen in various ways.

In some circumstances, the now-deceased partner was a key point of contact within the business. This may dramatically impact sales and the overall logistics of the business.

There also may not be someone inside the business with the sufficient skill set to step in the role. These are just some of the issues that may arise without a forward-thinking approach in place.

On average, businesses lose 60% of their revenue following the death of a founder.

What problems may arise from not having Partnership Insurance?

Financial problems often occur following the death of a partner within a business. Not only is a key skillset lost, the deceased family often needs to be compensated.

Without Partnership Insurance in place, this can become a difficult process. Two of the most common problems are:

  1. The deceased family may want to access the cash value of the former partner’s shareholding. This can cause issues as businesses often do not have significant amounts of cash available. In some cases, this may lead to a loan being required to pay the deceased family. We can also not take as a guarantee that a loan will be granted.
  2. If cash is not an option, the deceased spouse may decide that they would like to replace them in their role. This could lead to friction as previous plans and agreements may not be viable.

If capital cannot be repaid immediately, in some cases surviving partners may agree to pay the deceased estate over a number of years.

Having Partnership Insurance in place creates structure and a procedure to be followed in the death of a partner. This reduces both emotional and financial stress as the business attempts to put together a roadmap going forward.

Are there different types of Partnership Insurance?

Yes. Partnership Insurance can be set up in three different ways. Each arrangement is slightly different and the most suitable will depend on your specific circumstances.

The three types of Partnership Insurance are:

1. Life of Another

With a ‘life of another’ policy, each partner insures their fellow partners for the amount needed to purchase the deceased share of the business.

For example, should there be three partners within a business, each partner would be required to take out two policies.

These ‘life of another’ partnerships would be arranged as per Table 1 below.


Life Assured

Life Cover Needed



















Table 1: Life of Another example

Should Paul die, Eugene and Sandra will each collect €450,000 under their partnership policies. This will give them sufficient funds to purchase Paul’s shareholding from his estate.

Paul’s beneficiaries/estate would receive €900,000. I.e. the value of his shareholding in the company.

2. Own life in trust

Setting up Partnership Insurance under ‘own life in trust’ is also an option. In this case, each partner sets up a policy under trust for the benefit of the remaining partners. On death, the benefit is paid to the trustees of the policy.

Following this, the trustees pay the proceeds to the surviving partner(s) who then use the funds to purchase the deceased partner’s share of the business.

Each partner will pay the premiums for their own plan. In effect, each partner will insure their own life for their value to the company.

If a partner should die, the remaining partners will receive a percentage of the Partnership Insurance policy that is in place.

Below is an example of how an ‘own life in trust’ policy may be set up.


Value of shareholding to company

Life Cover needed

In trust for




Partners (Eugene & Niall)




Partners (Paul & Niall)




Partners (Eugene & Paul)

In the above, this would mean a total value of €1,350,000.

For example, should Paul die, his partners, Eugene and Niall will each receive a portion of the €450,000 life cover. The amount received will depend on the value of the shareholding to the firm.

In the above example, all shareholdings are equal. Therefore, each partner would receive €225,000. These proceeds can then be used to buy back the deceased share of the business. Paul’s estate would then receive the €450,000

If you are unsure what type of Partnership Insurance is most suitable, it is worth consulting a Financial Broker. At emero, we specialise in this area of advice and would be happy to answer any questions you may have.

3. Self-insurance

This method of Partnership Insurance differs from the first two. Each partner is required to take out a Section 785 life insurance policy.

This is also referred to as Pension Term Assurance. This policy will be taken out on their own life. It is designed to provide for their beneficiaries on their death.

With the example, each partner would insure themselves for €450,000 as per the other two examples. Should they die, the full amount of €450,000 will go to their estate or next of kin, in lieu of any payments from surviving partners.

It is the responsibility of each partner to pay their own premiums.

Are the proceeds of partnership insurance taxed?

Not in most cases. With a partnership insurance structure that has been put in place, the policy owner can purchase shares from the deceased representatives under ‘own life in trust’ or ‘life of another’ basis.

Therefore, there will be no tax liability in these circumstances.

Are premiums eligible for tax relief?

No. Partnership Insurance premiums are not eligible for tax relief on personal income.

How to arrange Partnership Insurance?

Setting up your partnership insurance will be relatively straightforward. At emero, we specialise in this area of advice and would be happy to guide you through the process. Should you wish to arrange a policy, you can expect a process similar to the below:

Step 1. Taking an overview

Assessing your situation and deciding who is being insured. In most cases, it is advised that all partners are insured. Any partners who are not insured will not be eligible to benefit from another partners policy.

Step 2. Calculating the cover needed

Calculating the cover is when you will have someone experienced in this area. There are certain variables that must be considered:

  • Each partner should be insured for the current value of their share in the partnership.
  • Discuss whether payments will be needed to be made to the surviving partner(s) estate or next of kin.

There are also other variables and external factors at place. Your financial broker will undertake an in-depth overview and explain all potential options.

Step 3. Selecting a legal agreement

Before taking out Partnership Insurance, it may be necessary to seek legal and taxation advice before proceeding

Step 4. Arranging the Life Cover

When choosing your Partnership Insurance, you have different options with regard to the structure of the policy.

There is:

  • Life of Another
  • Own Life in Trust
  • Self Insurance

Each of these options will have advantages and disadvantages. Choosing an option will depend only on our specific set of circumstances.

Step 5. Set up required policies

The final step is to complete the documentation and arrange the relevant policies. At this stage, your Financial Broker will debrief and run through the nuances associated with your policy.

Any questions or uncertainties should be addressed and explained in detail. Once this process is complete, the application will be sent to the life insurance company.

In some cases, you may be requested to complete additional documentation or questionnaires.

Other considerations

Partnership Insurance allows shareholders within a company to put a structure in place. In a time that will be stressful both emotionally and financially, it is important there is a safeguard in place.

This will ensure peace of mind for both the surviving partners and the deceased estate. It will also help limit the disruption to the business caused by the sudden death of a partner.

There will be a process in place to be followed. It means there will be funds in place and potential cash flow issues may be avoided.

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