Buy Sell Insurance

Protect your business, heirs, co-owners and partners by ensuring smooth execution of a buy-sell agreement should an owner become disabled or pass away.
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What is Buy Sell Insurance?

To deal with some situations that frequently arise in co-founded businesses (death, disability, retirement, disagreement, divorce, bankruptcy, etc.) business owners will often use buy-sell agreements.

Buy-sell agreements specify what will happen to the interests of an owner, partner, or shareholder who passes away or becomes disabled. Should a business owner pass away or become disabled, the challenge with buy-sell agreements becomes; where do we get the funds to buy out the departing shareholder?

If your company's buy sell agreement requires that the other owners or partners purchase the deceased/disabled owner's interests, life or disability insurance (rather than personal funds, loans, or business assets) can be the simplest way to fund the buy sell agreement.

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Buy Out Interest

Provides a cash payment that other owners or partners can use to buy out a deceased or disabled owner’s share of the business.

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Policy Ownership

Policy can be owned by the business - or each owner can own a policy on each of the other owners.

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Preserve Assets

Helps prevent owners/partners from having to use personal funds or business assets to fund the agreement.

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Buy Sell Insurance is a good fit when:

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Your company has more than one owner or partner

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You have a buy-sell agreement in place (or plan to)

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You don’t want to use personal funds to purchase the interests of an owner or partner who can no longer run the company

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There is a risk of unwanted heirs entering the business if their shares aren't bought out.

What types of Buy Sell Insurance are there?

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Buy Sell Life Insurance

  • Substantial coverage amounts are available
  • Choose from term and permanent life insurance
  • Proceeds are tax-free to the beneficiary

Buy Sell Disability Insurance

  • Ages 18-60 eligible to be insured
  • Policy can be maintained until the insured person turns 64 or leaves the company
  • Benefits can be paid monthly, in a single lump sum, or a blend of the two
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How does Buy Sell Insurance benefit me?

  • Helps ensure smooth buy-sell agreement execution: With funds available to you, you have more options and lower likelihood of an adverse outcome.
  • Preferred source of capital: There are three alternatives to using insurance to fund a buy-sell agreement, none of which are optimal. Use personal funds or assets, which may or may not be available at the time. Business loans, which banks may be hesitant to offer following the loss of a key stakeholder. Business assets, which may have depreciated in value, and/or are necessary for the operation of the business.
  • Avoids unwanted heirs entering the business: Without buyout funding in place, heirs who may or may not have an interest in the business will be forced to get involved - this may or may not be optimal for the remaining shareholders.

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