Buy-Sell Life Insurance Agreement

Explore a buy-sell agreement life insurance policy.

What is a buy-sell agreement?

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A buy-sell agreement is a contract between owners outlining how assets of their business will be divided if an owner passes away. Without one, the business could experience a messy transition.

Why is buy-sell life insurance important?

When an owner dies, their business assets would typically transfer to the owner’s heirs. A buy-sell agreement sets the expectation that the assets will be bought out by the other owner of the business. A buy-sell life insurance policy is meant to help fund the buyout of the deceased owner’s business assets.

Where does the money come from?

A buy-sell agreement must be funded. The owners must have the money to buy each other out. Here are a couple of ways to do that:

  • Saving money over time.
  • Loans after the death of a business partner. This may not always be available though.
  • Life insurance. One nice thing about life insurance: The buy-sell agreement is fully funded as soon as the policy is in force.
Buy-sell agreements can cover a variety of business interruptions including:
  • Death
  • Permanent disability
  • Retirement
  • Other voluntary separation
  • Divorce
  • Bankruptcy
  • Irreconcilable business disputes

There is a possibility that you’ll want to buy a separate key person life insurance policy. For more information on key person life insurance, click here.

Buy-Sell Life Insurance Agreement - Business Owner Signing Contract in Office with An Agent

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