Business Strategies

Buy/Sell Funding

What is Buy / Sell Insurance?Financial Planner Fort Worth

Buy-sell insurance is one of the best ways to assure the continuation of your business in the event of a partner’s death. Many businesses purchase buy-sell life insurance to avoid the pitfalls often involved in the continuation of a business following the death of a partner.

Is a Formal Buy / Sell Agreement Required?

Buy-sell insurance is often accompanied by a legal buy-sell agreement that requires any surviving partner(s) to purchase the remainder of the business in the event of a partner’s death-but is not a requirement. In the event of a death, the purchase is funded by the death benefit proceeds provided by the buy-sell insurance policy.

How much insurance is allowed under a Buy / Sell Agreement?

The amount of insurance necessary varies by company and is often determined by taking the market value of the business divided by the percentage of ownership of the insured partner. Generally, up to 5 times the annual revenues generated by the business can also be included.


What is Key Person Insurance?Key Man

Often referred to as Key man insurance, it is a life insurance policy, held by a business, to cover the life of a vital employee. The proceeds from a key man life insurance policy are intended to provide the business with the time and money it needs to stay afloat while replacing a lost key employee.

Who buys key person life insurance?

Any business which employs individuals who are vital to the company’s survival (key employees) is a candidate for key man insurance. Many companies cannot survive the death of a key man or woman because the knowledge, skills, contacts, or business relationships of the deceased are so difficult to replace.

It is most frequent for small-to-medium-sized businesses to find themselves in need of key man insurance, but even large companies use it to protect themselves from the expense of finding and training a replacement for a key employee.

Who qualifies as a key person?

The qualifications of a key man or woman depend on your company (and your discretion). A general description is: an employee who possesses skills, knowledge, contacts, and/or relationships which are crucial toward your company’s continuance but which are very costly or difficult to replace.

Types of key person insurance

A business is eligible to buy any type of life insurance that a family or individual can purchase. Which type is best? Term life insurance is appealing because the key man or woman’s employment is expected to end by retirement age (term life insurance is the most affordable). However, cash value life insurance can also be appealing because it can be liquidated in the event that the key man or woman leaves employment without dying.

Business Continuation

What is Business Continuation?Open Sign Green

Businesses close. It happens all the time. Not for lack of business, good employees, or good products – it’s for a lack of proper Business Continuation planning in the event of the death of an owner.

Whether you plan on selling your business, transferring it to your family, offering it to your employees or closing the doors, you should plan for the unexpected death, disability, or incapacity of the business owner(s) and key employees to ensure an orderly transition of the business occurs.

What should be included in Continuation Planning?

Business Continuation planning with business owners should take into account transfers to family members, buyouts of partners or key executives, retirement, sale, death and disability. Without proper planning, your business may have to lay off employees, declare bankruptcy, liquidate assets, and leave creditors knocking on your door.

What are my options?

A simple and cost effective way to bridge these potential gaps and provide continuity to your business is through the use of life, disability and/or critical illness insurance.

To get started, decide which column you prefer for your exit strategy:

With Planning                                                       Without Planning

  1. Orderly Transfer to Family / Heirs                         1. Forced sale
  2. Pre-Planned Retirement                                          2. Laying off employees
  3. Structured Employee or Third Party Buyout        3. Bankruptcy
  4. Orderly Closing of the Business                             4. Total Liquidation





As an independent company, we can explore many carriers for our clients dependent on their needs. Some of our preferred partners are listed below. If you would like for us to explore other carriers, please ask.