Buy & Sell Insurance

Buy & sell insurance is risk insurance that business co-owners take out on one another's lives to enable them to buy a deceased or disabled co-owner's share in the business. It is one step closer to ensuring business continuity. 

The loss of a co-owner to death or disability could impact your business in the following ways:

• The existence of the business may be in jeopardy.
• Credit facilities may be affected adversely.
• Outsiders may obtain a controlling interest.
• Remaining co-owners may be unable to afford the deceased's interest or shares.
• The business interest may be sold below fair market value.

The solution

Buy & sell insurance enables business continuity. It works as follows:

• The co-owners enter into an agreement where they undertake to purchase the interest of their fellow co-owners should any of them die or become disabled.
• A co-owner effects a Greenlight benefit on the life of another co-owner and vice-versa. Each co-owner will consequently own a benefit on the life of the other and pay the premiums under the benefit of which they are owner.
• A Greenlight benefit provides the cash to facilitate the purchase of an interest in the business, thus ensuring business continuity and the financial welfare of a deceased's dependants.
• When more than one co-owner is involved, the benefit on the life of each co-owner will be jointly owned by the other co-owners, proportionate to their interest in the business.

An example of how it fits together:

Company X has three co-owners: A, B and C. The insurance is exercised in three ways:

1.  Co-owners A & B (the contracting parties) insure the life of co-owner C.
2. Co-owners A & C (the contracting parties) - insure the life of co-owner B.
3. Co-owners B & C (the contracting parties) insure the life of co-owner A.

 Features and Benefits

For the remaining co-owners:

• No risk of new co-owners joining the business who might be unskilled or incompatible.
• An inexpensive way of funding the purchase price.
• The business can continue with minimal disruption.

For the disabled co-owner and heirs:

•  An immediate cash payment, which can substitute the income lost as a result of the death or disability of a breadwinner.
• A negotiated purchase price negotiated by the parties concerned ensuring that the co-owner or his/her dependants receive the full value of the business interest.

How to apply

If you are interested in Buy & Sell Insurance, email us and we’ll have an adviser call you or contact a Personal Financial Adviser.