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Buy/sell insurance is normally purchased by a company with two or more partner owners.  Each person (or the company, it can be structured in different ways) buys a policy on the other partner.  If one of the partners dies, the surviving partner or partners use the life insurance proceeds to purchase the deceased partner’s portion of the business.  There is usually a contract that goes along with the purchase of buy/sell life insurance, stating the terms of the buy/sell agreement.

I actually know of a case of dentists that were partners.  They considered getting the buy/sell policies on each other.  One of the dentists got the policy; the other did not.  A few months later, the one that got the policy died of a sudden heart attack.  If the surviving partner had also purchased a buy/sell life insurance policy, he could’ve easily paid the widow for the deceased partner’s portion of the business.  But instead there was a lot of drama.

A buy/sell agreement with life insurance is not always appropriate for all companies.  However, it can be a great investment and insurance plan for partnerships and other small businesses.

This entry was posted on Wednesday, April 9th, 2008 at 3:46 pm and is filed under Buy Sell Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.