Buy/Sell Insurance
Buy and Sell Insurance
Protecting Your Business Ownership
Think of buy and sell insurance as a business prenup – it’s essential protection that defines what happens to business ownership when major life events occur.
What is Buy and Sell Insurance?
Buy and sell insurance provides the funding mechanism for business ownership transfers when triggering events occur. It’s a essential component of your business continuity strategy, working alongside a legally binding buy and sell agreement.
Protecting Against the Unexpected
Your buy and sell agreement and insurance cover scenarios such as:
- Death of a business owner
- Total and Permanent Disability (TPD)
- Terminal illness
- Trauma events
- Business partner retirement
- Voluntary exit
Why You Need a Buy and Sell Agreement
Without proper buy and sell arrangements in place
✓ Business ownership could become unclear
✓ Surviving partners might lack funds to buy out shares
✓ Family members might inherit unwanted business responsibilities
✓ Business operations could be disrupted
✓ Company value might deteriorate
Essential Components of Buy and Sell Protection
1. Buy/Sell Agreement
- Clearly defined trigger events
- Agreed valuation methods
- Transfer mechanisms
- Owner obligations
- Timeline requirements
2. Insurance Funding
- Death cover
- TPD insurance
- Trauma protection
- Terminal illness benefits
How Buy and Sell Insurance Works
Agreement Structure
Partners establish a legally binding buy/sell agreement.
Valuation Method
Determine how business interests will be valued.
Insurance Coverage
Put appropriate insurance policies in place to fund potential buyouts.
Regular Reviews
Update agreement and coverage as business value changes.
Key Benefits of Buy and Sell Agreements and Insurance
For the Business:
- Maintains business continuity
- Preserves client relationships
- Protects company value
- Ensures smooth ownership transition
- Maintains staff confidence
For Business Owners:
- Guarantees fair value for shares
- Provides certainty for family
- Ensures funding availability
- Reduces potential disputes
- Maintains control over ownership
Common Scenarios Covered
Death of Partner
Insurance provides funds for surviving partners to purchase the deceased's share.
Total Disability
Ensures disabled partner receives fair value while others maintain control.
Terminal Illness
Provides early access to funds for smooth transition of ownership.
We can help you:
- Assess protection needs
- Calculate appropriate coverage
- Structure insurance efficiently
- Coordinate with legal advisors
- Review and update regularly
Important Considerations
- Tax implications
- Policy ownership structures
- Premium funding options
- Valuation methods
- Legal requirements
Expert Guidance Required
Buy/sell arrangements should always be:
- Legally documented
- Professionally structured
- Regularly reviewed
- Properly funded
- Tax-effectively arranged
Frequently Asked Questions
How much coverage do we need?
Coverage should align with business value and ownership percentages.
Who owns the policies?
Ownership structure depends on various factors – we’ll help determine the most effective arrangement.