Buy-Sell Life Insurance

A clear agreement to protect everyone's interests

Without proper planning, the loss of a key individual could seriously affect your business and everyone who relies on it. That’s why it's important to have a clear succession agreement that can help your company survive the death of a co-owner or partner.

Without a buy-sell agreement, you may not have any say in what happens to your partner’s share of the business. You could face the sale of their portion or you may have to operate with people who don’t share your vision for the company. Your partner's heirs could offer to sell the ownership interest to you, but if you don't have enough money, the continuity of your business operations could be at risk.

Buy-sell insurance funds a win-win outcome

Buy-sell insurance is a good way to protect everyone's interests. It funds the purchase of the remaining shares if a partner, co-owner or shareholder passes away. The surviving partner uses the tax-free proceeds from the insurance policy to buy up the outstanding shares. The heirs receive full market value for the deceased owner's shares and the surviving partner can assume full ownership without having to sell assets or borrow money.

We'll make sure your insurance matches your business

Buy-sell life insurance can be structured to meet your specific needs. If your business is likely to have a limited life span – for example, 10 or 20 years – term life insurance may be an attractive and cost-effective alternative.

If you foresee the business continuing for a longer period, permanent or universal life insurance options lock in insurability and can be used to fund a buy-sell agreement up to retirement age, then later on serve as insurance for estate taxes. Besides contemplating the death of a partner, your buy-sell agreement should consider disability, retirement, the voluntary departure of a partner, and the potential break-up of the business.

One policy or two?

In most cases, separate policies insure each partner's life. In some circumstances, a joint first-to-die policy can be a cost-effective alternative. When one policy is used to insure two lives, the premiums are lower than the total premiums on two single-life policies. The cost is lower because the policy funds only one death benefit, rather than two. But if it's likely that either of you would take on another partner in the future, then two separate single-life policies might be more appropriate.

The right advice makes all the difference

As with any decision regarding your business, speak with your business advisor to make sure your decisions are well-informed and aligned with your overall plan.