Various agreements backed by life insurance may be used to provide for continuation or eventual sale of a business upon the death of an owner, purchase of a business by surviving partners, or the purchase of stock in a corporation when a major stockholder dies. I will present two used for life insurance in business. Others are out there but many are similar to these two.

Buy-Sell Agreements

Life insurance may be used to fund various types of buy-sell agreements which enable businesses to continue after the death of an owner. In any type of arrangement and important ingredient is an agreement between buyer and seller that the business will be sold at a predetermined price upon death of the seller. The agreement is worthless if the buyer hasn’t the money to purchase. This is where life insurance comes in. For example:

A partnership or corporation buys life insurance on each partner that will need to be bought out by the company.

Key Person Indemnification

Many companies may have a certain employee or employees which have an important role in the success of the business. As it turns out it could be devastating to the business if the employee were to die. This is a situation perfect for a Key Person life policy. If something were to happen and the person were to die, the company would be compensated to help cover the expense of replacing the deceased employee and any customer retention that may be dependent on them as well.