The insurance provides money. The buy-and-sell agreement creates the obligation and the method for transferring ownership. One without the other can fail.
A policy may pay while the agreement is outdated, or an agreement may require a purchase without sufficient funding. Buy-and-sell cover is commonly used to help fund the transfer of a business owner’s interest after death or, where structured, disability. Ownership percentages, valuation method, trigger events, policy roles, beneficiaries and premium arrangements must all work together.
Business value also changes. Cover set years ago may no longer match the agreed price, and new owners or departures can break the structure. Tax and estate consequences depend on the facts and current law.
Try this now
Place the signed agreement, latest business valuation and policy schedules side by side. Check that names, ownership percentages, trigger events and cover amounts align.
Ask the professional team
- What event activates the agreement and the policy?
- How is the price calculated, and when was it last reviewed?
- Who receives the insurance money and who must buy the interest?
- What tax and estate assumptions support the arrangement?
This structure requires coordinated legal, tax and insurance advice. A policy description is not a substitute for an enforceable, current agreement.