​HOW TO INSURE BUY-SELL AGREEMENTS
National Edition

• Learn the Coverage.
• Find the Prospect.
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Two people build a successful business together.

• They share the decisions.
• They share the profits.
• They share the risks.
• Then one of them dies.

WHO OWNS THE BUSINESS NOW?
Does the surviving owner suddenly have a new partner?

• The deceased owner's spouse?
• Children?
• Estate?
• Does the family want cash instead of ownership?
• Does the surviving owner have enough money to purchase the deceased owner's interest?
• What is the business worth?
• Who determines that value?
• Where does the money come from?

Those questions shouldn't be answered for the first time after someone dies.
That's why business owners have buy-sell agreements.
And it's why insurance producers need to understand the role life insurance may play in funding them.

THE AGREEMENT AND THE FUNDING ARE TWO DIFFERENT THINGS
This distinction is critical.
A properly drafted buy-sell agreement may establish:

• What triggers a purchase
• Who buys
• Who sells
• How value is determined
• How the transaction occurs
• Other rights and obligations

But an agreement requiring someone to purchase a business interest doesn't automatically create the money to do it.
THAT'S THE FUNDING QUESTION.
Life insurance may be one possible funding method when death is the triggering event.

• The producer's role isn't to draft the agreement.
• The producer's job is to recognize the potential insurance need and work with the client's legal, tax, and financial professionals where appropriate.

WHAT YOU'LL LEARN
This practical producer guide helps you understand and discuss issues involving:

• Business ownership
• Multiple-owner exposures
• Business continuation
• Buy-sell concepts
• Funding needs
• Life insurance
• Ownership structures
• Beneficiary considerations
• Business valuation concerns
• Existing agreements
• Existing insurance
• Underwriting
• Ownership changes
• Review triggers
• Documentation
• Professional boundaries
• Attorney and CPA involvement
• Cross-selling
• Prospecting
• Centers of influence
• Educational marketing

The objective isn't to make the producer a business attorney.
It's to help the producer recognize:

• “THIS BUSINESS HAS AN OWNERSHIP PROBLEM WE NEED TO ADDRESS BEFORE SOMETHING HAPPENS.”

WHO IS THIS GUIDE FOR?
Especially useful for:

• Life & Health producers
• Commercial Lines producers
• P&C agents expanding into Life
• Multi-line agencies
• Agency owners
• Producers serving partnerships
• Producers serving closely held corporations
• Producers serving LLCs with multiple owners
• Producers working with family businesses
• Producers conducting commercial account reviews
• Agents building business-owner niches

If you already insure businesses with multiple owners, this guide belongs on your producer desk.

START WITH ONE QUESTION.
During an appropriate commercial-account conversation, ask:

• “WHAT HAPPENS TO YOUR OWNERSHIP INTEREST IF ONE OF YOU DIES?”

Then listen.
You may hear:

• “His wife gets it.”
• “I suppose the kids would inherit it.”
• “We have something in our operating agreement.”
• “Our attorney handled that years ago.”
• “I'd buy his half.”
• “We've never really talked about it.”

Every answer leads to another question.

“I'D JUST BUY HIS HALF.”
Fine.
Ask:
“WITH WHAT MONEY?”
That isn't being confrontational.
It's identifying the funding problem.

• Suppose the deceased owner's interest is worth $750,000.
• Does the survivor have $750,000 available?
• Would the business borrow it?
• Could it qualify for financing after a key owner just died?
• Would payments strain cash flow?
• Would the deceased owner's family accept installments?

This is why an agreement and a funding plan should work together.

WHAT DOES THE FAMILY WANT?
The deceased owner's family may inherit an ownership interest.

• But do they want it?
• Can they operate the company?
• Do they understand the business?
• Would they rather receive cash?
• Does the surviving owner want them involved?

A good planning conversation considers both sides.
THE SURVIVING OWNER NEEDS CONTINUITY.
THE FAMILY MAY NEED VALUE.

WHAT IS THE BUSINESS WORTH?
A buy-sell arrangement may depend upon business value.
But valuation is not something the insurance producer should casually invent.
A business may have changed substantially since the agreement was created.

• Revenue increased.
• Assets increased.
• Debt changed.
• Profitability changed.
• The company acquired another business.
• The industry changed.

That's why valuation methods and review procedures matter.
When specialized valuation, legal, or tax guidance is required:
BRING IN THE APPROPRIATE PROFESSIONAL.

OLD AGREEMENTS CAN CREATE NEW PROBLEMS
A client says:

• “We've got a buy-sell agreement. We're good.”

Maybe.
Ask:

• “When was it last reviewed?”

If the agreement was created 12 years ago:

• Are the same owners involved?
• Are ownership percentages the same?
• Is the valuation still reasonable?
• Is the funding still adequate?
• Are the policies still in force?
• Is policy ownership still appropriate?
• Have beneficiaries or business circumstances changed?

AN OLD PLAN MAY BE SOLVING AN OLD PROBLEM.

THE INSURANCE SHOULD MATCH THE PLAN
The producer needs to understand:

• Why the insurance exists
• Who is insured
• Who owns the policy
• Who receives the proceeds
• How much coverage exists
• How the coverage relates to the agreement
• What happens if ownership changes
• What happens if the business value changes

Never assume:

• “There's a policy, so everything must be fine.”

Verify.

PROFESSIONAL BOUNDARIES MATTER
Buy-sell planning can involve:

• Legal issues
• Tax issues
• Business valuation
• Estate considerations
• Ownership structure
• Insurance

No single professional should pretend to do everything.
The insurance producer should know enough to recognize the exposure, ask good questions, document carefully, and coordinate with the client's other advisors.
A strong producer is comfortable saying:
“WE NEED YOUR ATTORNEY AND CPA INVOLVED IN THIS PART.”
That's professionalism—not weakness.

NOW LET'S FIND THE PROSPECT
This may be one of the easiest prospect lists a Commercial Lines agency can build.

• Run a report.
• Look at your commercial accounts.

WHICH BUSINESSES HAVE TWO OR MORE OWNERS? There's your starting list.

PROSPECTING TRIGGER #1
TWO OR MORE OWNERS

• Partnership.
• LLC.
• Corporation.
• Family business.
• Professional practice.

The legal structure may differ, but the producer's curiosity should be the same:

• “What happens to the ownership if one owner dies?”

PROSPECTING TRIGGER #2
A NEW PARTNER
Your commercial client calls:

• “We've added another owner.”

Don't hear only:

• “I need to update the policy.”

Hear:
OWNERSHIP CHANGED.
Ask whether the business-continuation plan changed too.

PROSPECTING TRIGGER #3
AN OWNER IS PREPARING TO RETIRE

• Retirement discussions often expose succession issues.
• Who will own the business?
• Who will buy the retiring owner's interest?
• What happens if the owner dies before retirement?

That can create an immediate planning conversation.

PROSPECTING TRIGGER #4
THE BUSINESS HAS GROWN

• A buy-sell plan created when the business was worth $300,000 may look very different after the company becomes worth several times that amount.

Growth should trigger a review.

PROSPECTING TRIGGER #5
THE BUSINESS BORROWS MONEY
New financing may indicate:

• Growth.
• Expansion.
• Acquisition.
• New real estate.
• New equipment.

All of those can change the company's value and ownership exposure.
Ask whether the continuation plan still fits the business.

PROSPECTING TRIGGER #6
FAMILY BUSINESSES
Family businesses can create particularly complicated ownership questions.

• Children working in the business.
• Children not working in the business.
• Multiple generations.
• Spouses.
• Unequal involvement.

The insurance producer shouldn't design the estate plan.
But the producer should recognize when:

• “THIS FAMILY NEEDS A CONVERSATION WITH ITS ADVISORS.”

​THE COMMERCIAL RENEWAL QUESTION
Add this to appropriate commercial renewal reviews:

• “HAS ANYTHING CHANGED IN THE OWNERSHIP OF THE BUSINESS?”

If yes:

• Follow it.
• New owner?
• Retiring owner?
• Ownership percentage changed?
• Someone bought out?
• Someone inherited an interest?
• Agreement updated?
• Insurance reviewed?

One question can uncover the opportunity.

BUILD A BUY-SELL PROSPECTING LIST.
Start with 20 appropriate commercial clients with multiple owners.
For each account, determine what you already know.
Then ask permission to conduct a business-continuation review.
You don't need to tell them:

• “I want to sell you life insurance.”

Try:

• “We've done a good job protecting the property and liability side of your business. I'd like to make sure we've also discussed what happens to the ownership if something happens to one of you.”

That's a professional reason to meet.

CENTERS OF INFLUENCE MAY BE ESPECIALLY IMPORTANT HERE
Buy-sell planning naturally involves other professionals.
Potential relationships include:

• Business attorneys
• Estate-planning attorneys
• CPAs
• Business valuation professionals
• Bankers
• Commercial lenders
• Financial professionals
• Business consultants

Here's the opportunity:
Don't approach an attorney saying:

• “Send me life insurance leads.”

Instead, demonstrate that you understand your role.

• You recognize funding issues.
• You respect legal boundaries.
• You don't rewrite their agreements.
• You bring them into conversations when needed.

BECOME THE INSURANCE PROFESSIONAL OTHER ADVISORS WANT IN THE ROOM.

EDUCATIONAL PROSPECTING
Business owners ask questions such as:

• What happens to my business if my partner dies?
• What is a buy-sell agreement?
• How do you fund a buy-sell agreement?
• Can life insurance fund a business buyout?
• How often should a buy-sell agreement be reviewed?
• What happens if the business is worth more than when the agreement was written?

Those questions can become:

• Website articles
• Google Business Profile posts
• Facebook posts
• YouTube videos
• Emails
• Commercial newsletters
• Chamber presentations
• Business-owner seminars

One particularly strong headline:

• “YOUR BUSINESS PARTNER DIES TONIGHT. WHO OWNS THEIR HALF TOMORROW?”

That earns attention because it asks a real business question.

A 30-DAY BUY-SELL PROSPECTING PLAN

WEEK 1 — IDENTIFY 20 MULTI-OWNER BUSINESSES
Start inside your existing Commercial Lines book.
​
WEEK 2 — ASK THE OWNERSHIP QUESTION

• “What happens to each owner's interest if one of you dies?”

Don't assume.
Listen.

WEEK 3 — PUBLISH ONE BUSINESS-CONTINUATION QUESTION
Use educational content to reach additional business owners.
Example:

• “Your Partner Dies. Do You Inherit a Business Partner You Never Chose?”

WEEK 4 — FOLLOW THE CASES
Track:

• Existing agreements
• Agreements needing review
• Existing funding
• Coverage gaps
• Valuation questions
• Attorney involvement
• CPA involvement
• Insurance opportunities
• Future review dates

Then start the next group.

ONE BUY-SELL REVIEW CAN UNCOVER MUCH MORE
Suppose you begin with two owners.
During discovery you learn:

• One owner generates most of the sales.
• The company has a $1 million loan.
• Twenty-five employees depend upon the business.
• One owner wants to retire in five years.
• Benefits are becoming a recruiting problem.

Now the conversation may involve:

• Buy-sell funding
• Key-person insurance
• Business-owner life insurance
• Debt protection
• Disability income
• Small-group health insurance

The producer didn't manufacture those needs.
THE BUSINESS REVEALED THEM.

REAL-WORLD PRODUCER THINKING
The guide includes practical situations involving business owners and ownership transitions.
Work through them using:

• HEAR →
• ASK →
• VERIFY →
• DOCUMENT →
• NEXT SAFE ACTION

The producer learns when to:

• Ask another question.
• Review an agreement.
• Verify insurance.
• Contact underwriting.
• Bring in an attorney.
• Bring in a CPA.
• Document the file.

Or wait for professional guidance before recommending a solution.

PRACTICAL PRODUCER TOOLS
Use this guide for:

• Multi-owner account reviews
• Business-continuation discussions
• Buy-sell discovery
• Existing-policy reviews
• Commercial renewals
• Ownership-change conversations
• Centers-of-influence development
• Cross-selling
• Prospecting
• Educational marketing
• Producer training
• Scenario discussions

WHAT COULD ONE BUY-SELL OPPORTUNITY BE WORTH?
The guide costs: $25.

• One review could repay it.
• One policy could repay it many times over.
• One multi-owner business may require more than one policy.
• One attorney or CPA relationship may produce additional opportunities.

And the guide remains on your producer desk for the next business.
$25 — BUY IT ONCE. USE IT FROM NOW ON.
CLICK HERE TO BUY — ONLY $25

NEED MORE MULTI-OWNER BUSINESSES TO TALK TO?FYI Express+ can help agencies develop educational marketing and prospecting campaigns aimed at the commercial niches they want to grow.
Instead of advertising:

• “We sell life insurance to businesses.”

Ask the question:

• “WHAT HAPPENS TO YOUR BUSINESS IF YOUR PARTNER DIES?”

That's relevant.
That's understandable.
And it can start a serious insurance conversation.

• BE FOUND.
• BE HELPFUL.
• BE REMEMBERED.

ASK EDDIE ABOUT BUSINESS-OWNER PROSPECTING & FYI LOCAL VISIBILITY

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HOW TO INSURE BUY-SELL AGREEMENTS

• Protect the Ownership.
• Protect the Family.
• Protect the Business.

ONLY $25
Buy It Once. Use It From Now On.
CLICK HERE TO BUY

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