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Two business partners shaking hands across a desk

For partners and co-owners

Funding a buy-sell
with life insurance.

A buy-sell agreement says who buys an owner's share and at what price. Life insurance is one common way to make sure the money is there.

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Why it matters

A promise needs
cash behind it.

Without funding, a buy-sell agreement can stall. Three problems we hear about:

The survivors can't afford the buyout.

Owners rarely have that much cash on hand. A policy can pay the agreed price when it is needed.

The family does not want to run the company.

A spouse or child may prefer cash over a share they did not choose. Funding gives them a clean way out.

The agreement is ten years old.

If the company has grown, the old price and the old coverage amount may both be out of date.

Two men shaking hands over a table with papers and a tablet

Two main setups

Cross-purchase or
entity redemption.

Your attorney picks the structure. The insurance follows it.

  • Cross-purchase. Each owner buys a policy on the other owners. When one dies, the others use the money to buy that share.
  • Entity redemption. The company owns a policy on each owner and buys back a deceased owner's share.
  • With many owners, cross-purchase can mean a lot of policies. Some plans use a separate entity to hold them.
  • In 2024, in Connelly v. United States, the U.S. Supreme Court held that a company's duty to buy back a deceased owner's shares did not lower the company's value for federal estate tax. So the life insurance proceeds the company received counted toward that value. That makes the setup worth reviewing.
  • Talk with your CPA or attorney before you set this up.
Paul Daniels
Paul DanielsLicensed insurance agent · NPN 20986580

How we help

We work from your agreement.

Send us the agreement or the plan your attorney is drafting. We match each policy's owner, beneficiary, and amount to it, request quotes, and help each owner through the application.

If one person also drives most of the revenue, key person coverage may belong in the plan too.

  • Policies matched to your written agreement
  • Life insurance in states where we are licensed for life insurance · Paul Daniels, NPN 20986580 · FL license G065122
  • No fee for our help. If you buy, the insurance company pays us a commission, and commissions can differ by company.

Three steps

Buy-sell life insurance, step by step.

Share the agreement

Or the draft. We note the price formula, the owners, and the structure.

Quote each owner

Each owner applies, and each is reviewed separately by the insurance company.

Review as value changes

When the business grows, the coverage may need to grow with it.

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Keep in mind

Approval is per person.

Each owner goes through underwriting. One partner may be approved on different terms than another, or not at all.

  • We do not draft agreements or give legal advice.
  • We do not promise approval or a price.
  • We do not set the value of your business.

Before the call

Gather these first.

  • Your signed or draft buy-sell agreement
  • Each owner's share
  • A recent business value estimate
  • Existing policies on any owner
  • Your attorney's and CPA's contact details

Questions

Buy-sell life insurance FAQ.

As of October 13, 2026.

What is a buy-sell agreement?

It is a contract among business owners. It says what happens to an owner's share if that owner dies, becomes disabled, or leaves, including who buys it and at what price.

Why use life insurance to fund it?

It can pay cash at the moment the buyout is due, so the remaining owners do not have to borrow or sell assets. Approval is not guaranteed.

What is the difference between cross-purchase and entity redemption?

In a cross-purchase, owners own policies on each other. In an entity redemption, the company owns the policies and buys back the share. Taxes and costs differ, so your attorney and CPA should choose.

What did the Connelly case change?

In 2024, in Connelly v. United States, the Supreme Court held that the company's duty to buy back a deceased owner's shares did not lower its value for estate tax, so the life insurance proceeds it received counted toward that value. Many owners are reviewing company-owned setups because of it. Talk with your CPA or attorney before you set this up.

Should the coverage match the buyout price?

Many owners aim for that. Since business value changes, review the price and the coverage together on a schedule.

Can a single owner use a buy-sell?

Yes. A sole owner may agree to sell to a key employee or family member. Life insurance can fund that too.

Related guides

Business owners Key person Florida life insurance

Make the agreement
work when it counts.

Book a free 15-minute call, and have your agreement handy.

Book a 15-minute call

By Paul Daniels, licensed insurance agent (NPN 20986580).

Disclaimer

Daniels Health Advisors LLC is an independent insurance brokerage, not an insurance company. Agent: Paul Daniels, NPN 20986580, Florida license G065122. We help with life insurance only in states where we are licensed for life insurance. Life insurance is not health insurance. Every policy depends on approval by the insurance company, based on things like age, health, habits, and income. Prices and terms are set by the insurance company. We never guarantee approval or a price, and we do not promise any company's rates. Cash value, loans, and riders work differently in each policy. This page is general information, not legal or tax advice. Talk with your CPA or attorney about tax and legal questions.