What Is It and Do I Need It?
The understandings and the terminology of a “Buy Sell” and/or “Business Insurance”, “Equity Purchase”, “Cross Purchase” and “Key Man” are all terms that basically are referencing the buyout of a partner. This is a buy out of the percentage of ownership that the partner holds in the event of a premature death, while a owner of that Corporation or Partnership.
How it Works
The Corporation or Partnership would own an Insurance policy on the lives of each of the owners. The idea is that, in the event of a premature death, the policy would pay the Death Benefit to the Corporation or Partnership. The Corporation or the Partnership would then buy out the surviving spouse and/or beneficiary of the deceased owner and that would free the Corporation of any present or future financial obligations. In addition, this would take care of the deceased owner’s beneficiaries.
This is generally a clean and cost effective way to insure the continuation of your business and to avoid major conflict and or financial disaster.
A Case Study
- This Case study involves three partners in a S-Corporation.
- There are significant age differences 56, 46, 36 all males and two of the three owners are Cigar smokers. One partner, also a cigar smoker had a heart stent procedure. These factors affect the cost for coverage.
- They needed a 1.5 Million dollar policy on each Partner.
For starters, right off the bat Greco Brokerage was able to secure a company with two cigar smokers to immediately qualify for a Standard Non Smoker Rate. This results in a savings of tens of thousands of dollars over a 20 year period.
During the underwriting process we had the same insurance company issue the three policies.
- One of the partners qualified for a better-than-applied-for rate and had an unexpected substantial savings of $3,898 a year, translating to a total savings of near $80,000 over the life of the policy.
- A second partner received an offer just as applied for.
- The third partner, who had the heart stent procedure, got an offer of a table rate of ‘H’. He was willing to accept the policy. Greco Brokerage told him we wanted to shop it back out. This was not good odds for us coming back with something better.
However, in this case the odds were in our favor as well as the insured’s. We had a company come back with a table rate of C. This saved the client $3,376 per year. Totaling nearly $68,000 over the life of the policy.
- In the end, the owners had their insurance for their Buy Sell Agreement in place. Two policies placed with one insurer and the third policy placed with a second insurer.
If you take a good look at this case from the beginning to the end you will see just how many times during this process that Greco Brokerage saved our clients a boat load of money.
- We were able to obtain non smoker rates for the Cigar smokers and the lowest initial potential offer from day one for all three clients.
- We were able to obtain one of our client’s a better than applied for rate at the final issue of policy.
- Finally we were able to re shop for the partner that had the heart stent procedure. This produced even more favorable results.
This is what we mean when we say Greco Brokerage Shopping Products and Price for Our Clients!