Home > Business Strategy > Buy-Sell Insurance – Protecting Your House

Buy-Sell Insurance – Protecting Your House

I’m heading out this afternoon to the memorial service of a client who passed away. He was the CEO/President of his business, which he ran for over 30 years. I know the buy/sell agreement was in place for his organization as we often spoke about it. How well is your organization protected if the leadership dies or becomes disabled?

Part of “protecting your house”is making sure if you as the leader dies or becomes incapacitated to the point of not being able to run the company, then there is a financial plan is place to fund that strain on the business. It’s essential to create what is called a Buy-Sell Agreement with partners or the organization, so that in the event of that misfortune, the company can survive.

Example – Bill Jones is CEO of his small business. His wife Susan plays no part in the business and never wants to. Bill dies suddenly. Susan is ready to cede control of the company to the next in line as soon as she gets her buy-out. The questions to ask are – who is next in line and where will the buy-out money come from? That’s what a well-structured and communicated buy-sell agreement will do.

Life insurance is the normal funding source. I recommend making the company the payor and the beneficiary. You have many options in the life insurance to consider between term and permanent plans. Regardless of your product appetite, some funding mechanism must be in place. Talk to your agent.

BONUS – You are 65% more likely to be disabled by the age of 65 than to die. Disability on Buy-Sell Agreements are often overlooked. Make sure you talk to your insurance professional about that, too!

© 2010 Dan Weedin. All Rights Reserved

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