Page 21 - Life Assurance

ilies of deceased stockholders. Those who
have inherited the deceased stockholder's
shares may enter the business but, because of
inexperience may cause losses or even
bankruptcy.

Life insurance arranged to prevent these
losses is appropriately called business
continuation insurance.

In a business continuation plan funded by
life insurance, usually the owners of a business
agree in advance as to what is to be done with
the ownership shares in the event of death.

For example, two partners that own equally a
business valued at L.E 100,000. The chief asset of
the business is a factory building. Neither partner
has any family member capable to manage the
business in case of death. Yet it is realized that the
premature death of a partner will force the sale of
the building to obtain money to retire that share of
the business and to make money available for the
use of the family. If the building were sold at forced
sale, it is doubtful that L.E 50,000 would be realized.
To prevent this loss the partners enter into a buy
and sell agreement, in which each agrees to buy the
interest of the other if either dies. To fund the
agreement and to insure that money for this purpose

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