CONTINGENT LIABILITY AGREEMENT
Summary A Contingent Liability Agreement can be used by a company that takes out Contingent Liability insurance over the life of its equity owners or directors. Such insurance covers the company’s contingent liabilities should the owner or director die before the company has paid off any debt for which the owner or director has signed a suretyship. A Contingent Liability Agreement is an acknowledgement by the life assured that the insurance policy is in place, and a confirmation about each party’s rights and obligations around the life policy.
Why do I need a Contingent Liability Agreement? Often a company owner or director signs over a security for the company (such as a suretyship, guarantee or undertaking), most commonly when the company takes out a loan or applies for a credit facility. If the owner or director dies before the loan or facility is paid off, the company may be forced to settle the amount prematurely, which could cause the company serious financial problems. This can prompt the company to take out Contingent Liability insurance cover over the surety’s life. A Contingent Liability Agreement can be a useful document for the company to sign with the life assured. It sets out the life assured’s rights and responsibilities with regards to the insurance policies, including what might happen to the policies if a life assured leaves the company for whatever reason.
What does the agreement say? The Agreement consists of: Definitions; Introduction; Policies; Cession of Policies; Disputes; General.
What does this agreement look like? The document can be printed onto six pages.
What do you need to do to use the Contingent Liability Agreement?
- Read the sample contingent liability document to ensure that it suits your requirements. Make any changes as required.
- Complete Annexure A by adding in the details of the life policies taken out.
- Ensure both policyholder and the life assureds sign the Agreement with each getting a copy of the final, signed agreement.
Also viewed: Key Man Insurance Agreement
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