If you own a business in Fort Lauderdale, you’ve likely thought about what would happen if a partner passes away unexpectedly. Who would take over their share? How would the business stay financially stable? A buy and sell agreement funded by life insurance is the solution many business owners rely on to avoid disputes, protect their company, and secure their families’ futures.
At Summit Life Insurance, we help business owners design customized buy-sell agreements with life insurance to ensure a seamless transition in the event of a partner’s death.
What Is a Buy-Sell Agreement?
A buy-sell agreement is a legally binding contract between business partners or shareholders that outlines what happens if one partner:
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Dies
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Becomes disabled
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Retires
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Decides to sell their interest
The agreement specifies how ownership will be transferred and at what price. To fund this agreement, many businesses use life insurance. This ensures there’s money available to buy out the deceased owner’s share without putting financial stress on the company or remaining partners.
Why Use Life Insurance for a Buy-Sell Agreement?
Without proper funding, a buy-sell agreement is just a piece of paper. Life insurance provides guaranteed liquidity at the exact time it’s needed. Here’s why this strategy works:
✔ Immediate Cash – The death benefit provides funds to purchase the deceased partner’s interest.
✔ Fair Valuation – Prevents disputes between surviving owners and heirs.
✔ Business Continuity – Keeps operations stable without financial strain.
✔ Family Protection – Ensures the deceased partner’s family receives fair value for their share.
At Summit Life Insurance, we structure policies to match your agreement and your business’s needs.
Types of Buy-Sell Agreements
There are two main types of buy-sell agreements funded by life insurance:
1. Cross-Purchase Agreement
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Each owner buys a life insurance policy on the other owners.
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When one owner dies, the others use the death benefit to buy their share.
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Works best for businesses with 2-3 partners.
2. Entity-Purchase (Stock Redemption) Agreement
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The business itself buys life insurance on each owner.
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When an owner dies, the business uses the payout to redeem their shares.
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Common for businesses with multiple partners or corporations.
We help you determine which approach is best based on your ownership structure and goals.
How Does It Work?
Here’s a simple example:
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Business Value: $2,000,000
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Two Partners: Each owns 50%
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Life Insurance Coverage: $1,000,000 on each partner
If Partner A dies:
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The policy on A pays $1,000,000 to Partner B (or the business).
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The funds buy out A’s share from their family.
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Partner B now owns 100% of the company without financial hardship.
Tax Considerations
One of the advantages of using life insurance for buy-sell agreements is that life insurance death benefits are generally income tax-free to the beneficiary. However, the agreement must be structured properly to avoid tax issues like the transfer-for-value rule.
At Summit Life Insurance, we work with your legal and tax advisors to ensure compliance and maximize tax efficiency.
Who Needs a Buy-Sell Agreement with Life Insurance?
If you’re a business owner in Fort Lauderdale, consider a buy-sell agreement if:
✔ You have two or more partners.
✔ You want to avoid conflicts with heirs.
✔ You want to protect your business from financial instability.
✔ You want to provide fair compensation to a deceased partner’s family.
Whether you own a law firm, medical practice, construction company, or small business, a buy-sell agreement is essential for long-term stability.
Why Choose Summit Life Insurance?
When it comes to buy and sell agreement life insurance, you need an expert who understands both insurance and business succession planning. Here’s why Summit Life Insurance is the right choice:
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Customized Solutions – We design plans based on your business value and structure.
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Top Insurance Carriers – Access to competitive rates and strong policy options.
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Local Expertise – Serving Fort Lauderdale businesses with personalized service.
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End-to-End Support – From agreement funding to ongoing policy management.
We make the process simple, transparent, and stress-free.
Frequently Asked Questions (FAQs)
1. How much coverage do I need for a buy-sell agreement?
Coverage should match the value of each partner’s ownership interest.
2. Who owns the life insurance policy?
It depends on the agreement type—partners (cross-purchase) or the business (entity-purchase).
3. Are premiums tax-deductible?
Generally, premiums are not deductible, but the death benefit is typically tax-free.
4. Do I need a lawyer to set up a buy-sell agreement?
Yes, a legal professional should draft the agreement. We work alongside your attorney for the insurance portion.
Final Thoughts
A buy and sell agreement funded with life insurance isn’t just a smart business move—it’s essential protection for your company, your partners, and your family.
At Summit Life Insurance, we help Fort Lauderdale business owners secure the right coverage and ensure their agreements are fully funded and legally sound.
Don’t wait for a crisis—start planning today. Contact Summit Life Insurance for a free consultation and protect your business for the future.
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