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HomeEmployee benefitsBuy-sell life insurance

Life insurance to fund your buy-sell agreement.

If an owner dies, your buy-sell agreement says who buys their share. Life insurance is one way to have the money ready when it happens. Tell us about your business and we'll talk it through with you.

Talk it throughWhat to have ready

Or call (619) 382-3810, Monday to Friday, 8:30am to 5pm Pacific.

FAQ

Buy-sell life insurance, explained plainly

What is a buy-sell agreement?

An agreement between the owners of a closely held business that says what happens to an owner's share if that owner leaves or dies. It typically requires the share to be sold back to the business or to the other owners.

How does life insurance fund it?

Life insurance can provide the money to buy a deceased owner's share. In one arrangement reviewed by the U.S. Supreme Court, the company held life insurance on each owner so it would have the funds to buy back their shares.

What are the main ways to set it up?

In a redemption agreement, the business buys back the shares and holds the policies. In a cross-purchase agreement, the owners agree to buy each other's shares and buy life insurance on each other to fund it. The choice changes who receives the insurance money, so decide it with your attorney and tax advisor.

What if the business owns a policy on an employee?

Federal law sets three steps before the policy is issued: the employee is told in writing that the employer intends to insure their life and the maximum amount, the employee agrees in writing to be insured and that coverage may continue after they leave, and the employee is told in writing that the employer will be a beneficiary. IRS Form 8925 is used to report the number of employees covered by employer-owned life insurance and the amount in force.

Do you write the agreement?

No. The agreement is a legal document your attorney prepares. We help with the life insurance that funds it and can work alongside your attorney and tax advisor.

Sources: Cornell Law School, Legal Information Institute, buy-sell agreement · U.S. Supreme Court, Connelly v. United States (2024) · 26 U.S. Code section 101(j) · IRS, About Form 8925. Coverage, price and approval are decided by the insurance company.

What to have ready

  • How many owners there are and each owner's share
  • Roughly what the business is worth, or how your agreement sets the price
  • Each owner's age
  • Whether you already have an agreement, or are still putting one together

What happens next

  1. We talk through your business and the agreement you have or are planning
  2. We review life insurance options for each owner with you
  3. If you decide to go ahead, each owner applies and the insurance company decides coverage and price
Talk it throughCall (619) 382-3810

Tell us about your business.

A licensed agent reviews your request and gets back to you. Prefer to talk? Call (619) 382-3810, Monday to Friday, 8:30am to 5pm Pacific.

If you request a quote, a licensed insurance agent may contact you. We use this only to respond to your request. Please give us an email or a phone number.

You may also need

  • If you request a quote, a licensed insurance agent may contact you.
  • Insurance: Coverage, price and approval are decided by the insurance company.
  • We do not give legal or tax advice. Talk to your attorney and tax advisor about how your arrangement is set up.