Buy–Sell Agreements Funded With Life & Disability Insurance
A business is one of the largest assets most owners will ever build — yet few have a written plan for what happens if a partner dies, becomes disabled, retires, or unexpectedly leaves the company.
A properly structured Buy–Sell Agreement, backed by the right insurance funding, ensures the business continues smoothly and that every owner — and their families — are financially protected.
What Is a Buy–Sell Agreement?
A Buy–Sell Agreement is a legally binding contract that outlines:
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What happens to ownership if a partner dies, becomes disabled, or exits
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How the ownership interest will be valued
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Who has the right to purchase the departing owner’s shares
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How the buyout will be funded
Think of it as a will for your business.
Without a Buy–Sell Agreement, disputes, financial strain, or forced liquidation can follow the loss of an owner.
Why Every Multi-Owner Business Needs One
✔ Protects the business from instability
A sudden ownership change can disrupt cash flow, leadership, and operations.
✔ Prevents disputes among partners or family members
A written agreement removes emotion and replaces it with clear rules.
✔ Guarantees a fair valuation
No need to negotiate during a crisis — the value is predetermined.
✔ Provides liquidity for buyouts
Insurance funding ensures the business or remaining partners have immediate cash.
✔ Protects the families of all owners
Surviving family members receive fair compensation for the deceased owner’s share.
How Buy–Sell Agreements Are Funded
The most effective way to fund a Buy–Sell Agreement is through life insurance and disability insurance.
1. Life Insurance Funding
If an owner passes away, the death benefit provides:
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Tax-free liquidity
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Instant funds to buy the deceased partner’s shares
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Stability for the company
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Fair compensation for the partner’s family
Each partner is insured for their ownership value.
2. Disability Insurance Funding
Disability is 6× more likely than death before age 65.
Disability Buy–Out Insurance provides:
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A lump sum or monthly instalments to buy out a disabled partner
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Protection for the disabled partner’s income
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Funds for the business to continue operating smoothly
This is one of the most overlooked — yet essential — parts of business continuity planning.
Types of Buy–Sell Agreements
1. Cross-Purchase Agreement
Owners buy insurance on each other.
Best for businesses with 2–3 partners.
2. Entity Purchase (Stock Redemption) Agreement
The company owns the policies and buys back the shares.
Ideal for larger ownership groups.
3. Wait-and-See Agreement
Combines both approaches and offers maximum flexibility.
Allows the business to decide the best buyout method at the time of trigger.
Who Should Have a Buy–Sell Agreement?
Any business with:
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Two or more partners
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Key shareholders
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Unequal ownership distribution
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Family-owned structures
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Plans to transition ownership in the future
If the business value is greater than $500,000 — a Buy–Sell Agreement is essential.
What Happens Without One?
A partner’s death or disability can lead to:
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Loss of control to the deceased partner’s family
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Forced sale of the business
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Legal disputes
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Severe financial stress
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Inability to continue operations
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Difficulty replacing the departing owner’s skills or capital
A Buy–Sell Agreement eliminates these risks.
Our Process at Lyons Life
We guide business owners through the entire planning process:
1️⃣ Business & ownership assessment
2️⃣ Agreement structure (cross-purchase, entity, or hybrid)
3️⃣ Accurate business valuation
4️⃣ Insurance design & funding strategy
5️⃣ Coordination with attorneys & CPAs
6️⃣ Implementation & ongoing review
Business continuity is not one document — it’s a strategy.
Why Business Owners Choose Lyons Life
✔ Independent — access to all major carriers
✔ Expertise in business valuations & entity structures
✔ Advanced planning solutions for key person protection
✔ Experience working alongside attorneys and accountants
✔ Clear, strategic guidance tailored to your business
We help owners create a plan that protects their company, their partners, and their families.
Protect the Future of Your Business
Let’s ensure your company continues smoothly — no matter what happens.