Start with the agreement
A policy does not replace a properly drafted agreement. Establish the intended transaction before choosing how to fund it.
Ownership transitions
An agreement needs a way to pay for it.
Insurance can help fund a purchase of an owner’s interest when an event covered by the policy occurs. The shareholder or partnership agreement sets the terms of the transfer. The insurance arrangement should support those terms, with ownership, beneficiaries and coverage reviewed together by your insurance, legal and tax advisors.
Start a private conversationSpeak with an advisor, or prepare a brief first.
Before choosing a policy
Four questions
worth asking.
Which events trigger a purchase?
How will the business be valued?
Who buys the shares, and who receives the insurance benefit?
Is the coverage still aligned with the business’s value?
Options and tradeoffs
The details
make the difference.
Identify funding gaps
Death, disability, retirement and a voluntary departure are different events. An insurance policy will only respond to events covered by its terms.
Review after business changes
New owners, a higher valuation or a revised agreement can change the amount and structure of protection needed.
Common questions
A clearer
starting point.
Does life insurance fund every ownership exit?
No. Life insurance responds to an insured death under the policy terms. Other exits need their own funding plan.
Should each partner own a policy?
There is no universal ownership arrangement. Your advisors should compare structures against the agreement, tax position and intended purchaser.
General information to prepare for a conversation. Coverage depends on underwriting and the policy contract. Your circumstances require individual advice.
Further reading: Insurance for business owners
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