Insurance is an operation whereby, in exchange for payment of a premium, the insurer undertakes to compensate a person (business) for loss or damage caused by the occurrence of an insured risk or to provide a benefit covered by the policy.
The purpose of insuring a person is to cover the insured’s physical well-being and to pay the insured, if the risk occurs, either a lump sum or a benefit, depending on the terms of the agreement concluded between the parties.
Objective: insurance can be taken out to cover loss or damage (illness, disability, death) suffered by the persons in the business, i.e. the business manager and employees. A supplementary pension can also be built up via certain insurance policies;
Who is concerned
Available mainly to the self-employed and small and medium-sized family businesses, people can be insured in all phases of the business' life cycle, and in particular in the following cases:
- creation of the business (social security, life insurance of the creator);
- management of the business (social security and staff management);
- growth of the business (hiring staff, major investments financed by bank loans);
- passing on the business (estate planning).
In particular, additional insurance can cover the risks associated with:
- frequent employee travel;
- risky activities;
- bank financing of an investment for which the bank requires life insurance on the head of the business manager.
Any natural person with the legal capacity to do so can take out an insurance policy. Legal persons can also take out an insurance policy provided that the commitments are entered into by duly authorised persons.
Information required by the insurer to make an insurance proposal
- risk to be insured;
- number of persons covered (possibly with personal data);
- maximum budget or insured amount required.
Documentation or description of the business
- copy of the company’s articles of association;
- minutes of the general meeting indicating the persons that are duly authorised to bind the company;
- copy of the identity cards (or passports) of the persons that can bind the company.
The cost of insurance is made up of the following elements:
- the premium (payable in advance) which constitutes the remuneration required by the insurer in exchange for its commitments. It should be enough to settle any claims;
- management and business expenses of the insurance company;
- expenses which represent a fixed fee per management service;
How to proceed
Taking out the insurance
Risk to be covered
The risk to be covered is:
- a future event (it cannot already have taken place);
- an uncertain event (definite or indefinite, but the date thereof is unknown);
- outside of the insured party’s control (hence exclusion of intentional acts).
Benefits provided by the insurance company
In the event of the occurrence of the insured risk, the insurer may:
- pay a benefit which is set after the loss occurs;
- pay a lump sum which is determined when the policy is taken out;
- carry out a service in execution of the policy.
Duration and amount
The duration and amount insured differ from one insurance policy to another insofar as all insurance policies are adapted to the risks insured, the basic data and the requirements of the policyholders.
The reviewing and processing times depend on the complexity, size and urgency of the case.
Types of insurance of persons
Salaried staff benefits from:
- compulsory accident insurance allowing insured parties to be covered by the Accident Insurance Association (Association d'Assurance contre les Accidents - AAA) in the event of:
- an occupational accident;
- a travel accident;
- occupational illness, and;
- additional cover provided for by collective agreements or by the business manager with regard to:
- retirement pension;
- death or disabilty.
Employees on business travel
Travelling employees may benefit from:
- individual accident insurance for the persons specified (lump sum in the event of disability or death);
- assistance insurance.
Business manager or director
The disappearance or unavailability of the business manager or director can endanger the business if all of the activity depends on this person. Commitments made must be respected and financial resources must be guaranteed so that the business can continue to operate.
Depending on the formula chosen, key person insurance provides for various types of benefit:
- death or disability benefit;
- fixed daily allowances;
- compensation for the loss of gross profits;
- compensation for additional expenses;
- compensation for recurring overheads.
The entrepreneur may benefit from:
- unemployment insurance for business managers;
- life, health, accident insurance policies.
Advantages, disadvantages and risks
- compensation if the insured risks materialise;
- protection of the business against unexpected expenses;
- employee protection and satisfaction by protecting staff and their families against the uncertainties of life.
- administrative burden;
- high costs which increase operating expenses;
- periodic reassessment of the nature and extent of the risks to be insured;
- difficulty of assessing the risks linked to a capital sum.
Legal or contractual exclusions which are not covered by insurance policies, hence the importance of carefully looking at the general terms and conditions.