Buy Sell Insurance
Understanding Buy/Sell Insurance
A Buy/Sell agreement between company owners or partners is a crucial tool for protecting a business in the event of a significant change in ownership. To ensure this agreement is properly funded, it’s essential to have insurance in place so that the company or its owners/partners don’t need to sell assets to cover buyout payments if the agreement is triggered.
Buy/Sell Life Insurance
Buy/Sell Life Insurance provides a lump-sum, tax-free payment to the business or its partners if one of the insured owners or partners passes away. You have several options to choose from, including Term, Whole Life, and Universal Life insurance, to fund the agreement. If you anticipate a partner may exit the business within the next 10-15 years, a Term policy could be a cost-effective solution. For longer-term needs or if the coverage should extend beyond the Buy/Sell agreement, Participating Whole Life or Universal Life Insurance may be more suitable, as both options include long-term savings components.
Buy/Sell Disability Insurance
Buy/Sell Disability Insurance offers financial protection if one of the owners or partners becomes disabled and cannot actively participate in the business. It can provide a monthly income, a lump-sum payment, or a combination of both, specifically to fund the Buy/Sell agreement when a buyout is necessary. This insurance is distinct from Disability Overhead Insurance and is designed solely to facilitate the Buy/Sell agreement.
Ownership of Buy/Sell Insurance Policies
The ownership of Buy/Sell insurance policies depends on the terms of the agreement. In some cases, the policies are owned by the business, while in others, each partner may own a policy on the other owners. There is no one-size-fits-all approach, as the best structure will depend on the preferences of the company’s owners. We always recommend seeking professional legal advice when setting up a Buy/Sell agreement to ensure it’s done correctly.
Get Started Today
Contact us today for a no-fee, no-obligation review of plan options to determine the best fit to fund your Buy/Sell agreement.
Authorized distributor for The Canada Life Assurance Company, Equitable Life Insurance Company, The Manufacturers Life Insurance Company, Pacific Blue Cross, Sunlife and Benecaid. Manulife & Stylized M Design, and Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.
