Case Studies

Case Study 1 - Business Partners with no succession plans

Eureka Legal Advice:

‘‘ …Paul’s death has triggered an automatic default of both debts (as is the case with most loans and mortgages).’’


Paul, a 55-year-old lawyer, has a wife, Kylie, and two children. Paul is in partnership with his good friend, Doug, who is 32 years old and recently married. Paul and Doug are the partners in Eureka Legal Advice. Doug specialises in administration and staffing. Paul has the technical expertise to deal with clients and their legal needs.

Together, they make a competitive combination. Through seven years of hard work, the business is now worth $1.1 million.


Paul suffers a stroke and can’t continue working. Months pass and the business starts losing money. Doug can’t afford to hire someone to replace Paul, as Paul is still drawing a salary out of Eureka Legal Advice.

Doug wants to buy out Paul’s interest in the business but Doug and Paul can’t agree on what the business is worth.

Doug is unsure how to fund the purchase as all of his personal property is already held by the bank to secure the business debt. Later that month Paul dies leaving all his assets (including his interest in Eureka Legal Advice) to his wife, Kylie. Paul’s funeral is still two days away but Doug is already in trouble.

  • Eureka Legal Advice borrowed $230,000 to purchase new premises and the bank’s overdraft is running at $23,000. Both debts were guaranteed by Paul and Doug. Paul’s death triggered an automatic default of both debts. The bank manager required Doug to repay or renegotiate the loan: “Would Kylie guarantee the loan?”
  • The firm has lost one of its biggest assets – Paul’s knowledge. Doug has to immediately find someone who could fill that role.
  • Kylie couldn’t help run Eureka Legal Advice. Kylie’s once good relationship with Doug is souring over the dispute as to what should happen to the practice and Paul’s usual salary. Doug is eventually able to re-finance the two loans at a higher interest rate. He employs a lawyer on a salary of $80,000 a year.

Doug is forced to take on further debt to keep the business afloat. In desperation, Doug tries to sell his share of the business. The offers are only a fraction of what the business was worth before Paul suffered the stroke.


For Doug and Paul, the business was not only their job but their life and financial security.

The business was to be their retirement nest egg. Now it won’t even provide their families with a roof over their heads.

Solution Required

A business protection plan to cover business partners with a buy/sell agreement formalising the process and methodology of valuation.

Case Study 2 – Keyperson Revenue insurance


1. Two brothers running a large distribution business
2. Their extended family is wholly dependent on the business
3. One brother is the lynchpin of the operation
4. If he died, it would be difficult and very expensive to hire a replacement


1. Get a loan from the bank or use overdraft to operate, or
2. Take $600K key person cover on the key brother ($500k salary and $100k loss of profits)


(a) The Bank option

  • Borrow the money from a Bank
  • $600,000 at an interest rate of 8% would have an annual interest payable of $48,000
  • Based upon a 40 hour week, this is equal to: $23.07 per hour (Plus you have to repay the $600,000 principal)

(b) Keyperson cover option

  • Male 45 next birthday non-smoker $600,000 sum assured
  • Life cover only $57.81 per month or approx…33 cents per hour*
  • Life, total disablement $103.38 per month or approx…59 cents per hour*
  • Life, TPD, Trauma – only $312.90 per month or approx… $1.80 per hour*

* (based on 40 hour week for illustration purposes only)

Keyperson Benefits

  • Highly cost effective
  • Peace of mind
  • Financial security for your business and your family
  • Lifestyle choices for you and your family – you decide what happens in the future

Case Study 3 – Keyman Capital insurance


Bill operates a brand new coffee franchise. The value of the business is $500,000.
He sourced $50,000 of his own savings, $200,000 from his mortgage redraw, and borrowed the other $250,000 from the bank as a commercial loan.


6 months into business, Bill is involved in a car accident and suffers a total and permanent disability.

He will be unable to return to work. The business is relatively new, therefore does not yet have sufficient profits to employee a full time manager, and service the loans plus draw a passive income for him.

If he sells the business, it’s unlikely that he’d achieve a sale price equal to what his set up costs were as trading figures are for short time period.


When Bill had met with the bank, the terms of the commercial loan included a clause that required him to take out Keyperson insurance to cover the funds that he had borrowed.

While the commercial loan was for $250,000, when he met with his adviser, he increased the benefit amount to $500,000 so as to ensure that if he was to make a claim, the business debts could be covered entirely.

He can now pay off the debts, and either operate the business under management, or sell the business and provide a return on his initial investment.


  • Business debts are eliminated
  • Peace of mind to focus upon personal health
  • Potential to continue operating the business under management
  • Avoids a fire sale of the business and potential loss of hundreds of thousands of dollars.