If a shareholder dies, their business shares are passed to their beneficiaries — usually a surviving partner or family member. Beneficiaries have a say in how the business operates and could even sell the shares to someone who doesn't have the business' best interests at heart.
Shareholder protection insurance avoids that risk. It's an agreement that remaining shareholders can buy back shares if a key shareholder passes away. Insurance pays out to help fund the purchase.
Beneficiaries also benefit from this agreement. With shareholder protection insurance in place, families can sell their inherited shares at a fair market price.
