Buy-Sell Agreement Life Insurance
Buy-sell agreement life insurance funds a legal buy-sell agreement so that when a co-owner dies, the surviving owners or the business can buy that owner’s share at a set price. The agreement sets the terms and valuation, and the life insurance provides the cash to carry out the purchase without scrambling for funds.
If you co-own a business, a hard question sits in the background: what happens to an owner’s share if that owner dies? A buy-sell agreement answers it on paper, and life insurance provides the cash to make the answer real.
What it is / how it works
- Entity-purchase (stock redemption): the business owns policies on each owner and uses the proceeds to buy back the deceased owner’s interest.
- Cross-purchase: each owner holds a policy on the other owners and uses the proceeds to buy the deceased owner’s share directly.
Who needs it? Partnerships, LLCs, and closely held corporations with two or more owners; owners who want a funded, agreed price rather than a dispute over value; and families who want a fair payout without being pulled into running the business.
The agreement and the funding have to match, in both dollar amount and valuation method, and both should be reviewed as the business grows. Structure choice carries real tax consequences. We provide the insurance piece and coordinate with the professionals who draft the agreement. Legal and tax advice should come from your attorney and CPA, not from us.
How we help: We help you size the coverage to the agreed value, explain entity-purchase and cross-purchase in plain English, and request quotes on each owner. We work alongside your attorney and CPA so the policies and the agreement stay aligned.
