Buy-Sell Insurance

Buy-Sell Disability Insurance is designed to support the financial aspects of a buy-sell agreement in the event of a business owner's disability. It provides funds that can be used to purchase the disabled owner's share of the business, ensuring a smooth transition and continuity of operations.

There are three main types: Key Person Disability Insurance, which covers losses from the disability of a vital employee; Buy-Sell Disability Insurance, which facilitates the transfer of ownership if a business owner becomes disabled; and Business Overhead Disability Insurance, which covers ongoing business expenses during the disability of an owner or key employee.

While not legally mandatory, it's highly recommended for businesses with multiple partners. Without it, surviving partners may face financial difficulties in buying out the deceased or disabled partner’s share, potentially risking business stability.

Yes, Buy-Sell Insurance can cover multiple partners. Each partner can be insured separately, or a single policy can be structured to cover all partners, often using a formula to determine each partner's share in the event of death or disability.

Buy-Sell Insurance ensures business continuity, provides immediate liquidity to buy out a deceased or disabled partner's share, and stabilizes the business during transitions. It also reassures employees, creditors, and customers about the company's stability.

Generally, premiums for Buy-Sell Insurance are not tax-deductible in Canada. However, the benefit received is typically tax-free. It's advisable to consult with a professional advisor for specific cases, as tax implications can vary.

The value is usually predetermined in the Buy-Sell agreement, either through a fixed amount, a formula, or regular business valuations. This ensures a fair and agreed-upon price for the partner’s share at the time of the claim.

Buy-Sell Insurance involves a legal agreement between business partners. Upon a partner's death or disability, the insurance payout is used to purchase the affected partner's share of the business, avoiding the potential issue of unwanted external parties from stepping in.