What Does a Buy-Sell Look Like? Buy-sell agreements are typically funded by life insurance policies purchased on the lives of each of the business owners. The amount is usually specified in a contract created with the help of an attorney. You can enter into a buy-sell agreement at any time, but it often makes sense to do so when a business is formed or when new owners are brought into the business. Because business values can fluctuate, it’s important to review the contract with your accountant at least once per year or to include a calculation method in the agreement. Also be sure the insurance coverage funding the agreement is up to date. Business owners can also insure against the risk of becoming disabled and unable to work. In this case, disability income buyout insurance would fund the buy-sell agreement, allowing the disabled owners to be bought out, typically after a one-year waiting period.

Key Person Insurance

Key person insurance is another important component of a smart business continuation plan. Key person insurance is life or disability insurance purchased by the business on an essential employee but payable to the business. When a key person dies or becomes disabled, insurance can help make up for lost sales or earnings or cover the cost of finding or training a replacement.