Life insurance is similar for a business as it is for an individual in protecting against the financial loss associated with premature death. Though various kinds of companies exist (sole proprietorships, partnerships and corporations), life insurance is necessary to ensure capital is adequate and available if unexpected loss occurs.
The death of a business owner or partner in a business can also bring the end to the business; life insurance plays a vital part in protecting the integrity of a business if such event were to occur. Life insurance, in the form of a ‘buy-sell’ agreement, provides the necessary protection to ensure the survival of the business and a disbursement of ownership rights to remaining partners or owners.
As a licensed insurance agent, it is important to understand the basic concept of a buy-sell agreement as well as the types of buy-sell agreements available to properly insure against the loss of a business owner or partner.
The death of a business owner doesn’t necessarily mean the end to the business. Buy-sell agreements are used to provide structure in the absence of the business owner or partner.
A ‘buy-sell’ agreement, also known as a ‘buyout’ agreement, is defined as a financial agreement or arrangement that protects business partners against financial loss by securing a predetermined fair market value share of a partner that, upon a predetermined event such as death, is sold to the remaining partners in the business to ensure the continuation of the business. Read More