A buy-sell agreement using a life insurance policy as a tool; may just be your best idea yet!
Let me explain…
If you are in business with a “co-owner” or partner and are sharing the costs of this business, have you considered what may happen if;
Would you have the capital to “buy out” your partner? Also consider if you are retiring, would you be able to sell your portion of the business to your co-owner? Is there enough money in savings?
Maybe not!
This is where a buy-sell agreement using a life insurance policy may be your best choice.
Typically you would take out a TERM life insurance policy vs a PERMANENT life policy for these reasons:
Tom and Steve decide to go into business together to start up their own IT consulting firm. They each put in $250,000 for their start up costs.
This new business, lets call it…. ” T&S IT Consultants,” is dependent on both Tom and Steves hard work and expertise.
In order to help protect their mutual investments they each take out a life insurance policy on each other for $2.5 million. This $2.5 million is based on their personal investment of $250,000 x 10 years. This should be an adequate amount in the event of one of their deaths/disability to either cover the costs of the business till a replacement can be found, or to buy out their portion of the business from heirs to his estate.
See, these types of agreements help protect your business investments!
It allows you options, and time to help adjust your business plan after a big loss.
Above all, these policies are affordable and offer a huge peace of mind.