Buy-Sell Policies
A buy-sell life insurance policy helps protect your business and your family.
How does a buy-sell insurance policy work?
A buy-sell policy is purchased by the partners of the business. The death benefit can be used to buy out the heir’s interest in the business. As a result, the surviving partner does not have to sell the company or assets to raise money and is not forced to work with a surviving heir.
Types of buy-sell agreements
The cross-purchase buy-sell agreement is the most common and popular buy-sell agreement for small companies. It requires each owner to buy a life insurance policy on the remaining partners. Buy-sell cross-purchase insurance has a higher tax benefit than some other types of policies.
Under a redemption buy-sell agreement, the company purchases life insurance for each of its owners. It also is called an entity purchase agreement.
How is a buy-sell insurance agreement set up?
Best Life Insurance Advisors works with the company’s other key business professionals, including the CPA and the attorney, when they set up the financial structure of the company. The buy-sell agreement is usually the final piece of the puzzle.
The roles played by each expert in a buy-sell insurance agreement:
- The certified public accountant helps with the income-tax issues related to the business.
- The life insurance agent assists with determining the details of the buy-sell agreement.
- The valuation specialist provides information on how the partners should implement the price in a formal buy-sell agreement.
- The attorney drafts the agreement after consulting with each partner.