Buy Sell / Business Partnership Insurance

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.

  1. 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.
  2. A second partner received an offer just as applied for.
  3. 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.

  4. 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.

  1. 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.
  2. We were able to obtain one of our client’s a better than applied for rate at the final issue of policy.
  3. 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!

 

Case Study #2

72-year-old Female

 
This Case Study involves a 72-year-old female client. She was a existing client at the time when we sat down and reviewed here 403B Pension Plan account which was still being managed by the custodian and investment company she had with her prior employer before retiring. She indicated to me that she was making on average a 8% annual rate of return. When I questioned her on how she new this she told me that her investment adviser told her this. I glanced at the numbers. I asked her if I could take the last quarter of the last 5 years and due a total analysis. She replied go ahead.

So this is what we discovered the actual year end total returns to actually be:

  2011     2.20% return
  2012     4.75% return
  2013     8.25% return
  2014    -11.5% return
  2015     2.29% return

The actual Average Annual rate of return over the five year period was only 1.2%

Now to compliment this Case Study scenario, this client did a direct transfer of her existing 403B account into a qualified annuity with a top rated insurance company to avoid any taxation on the transfer. Her initial transfer amount was $111,592.63 and she received a bonus from the company of 5%, so here actual value of the account started with $117,172.26.

There is More!

  • She has the upside potential to earn from 2%- 8% in any given year.
  • She will never share in any market down turns. She cannot lose money and the bare minimum interest rate in her fixed account is currently at 2%
  • She can take up to 10% of the total account value in any given year free of penalty and or withdrawal charge.
  • She has a Nursing Home Waiver Endorsement at No Extra Charge
  • She has a Terminal Illness Waiver Endorsement at No Extra Charge
  • She can at any time elect a Guaranteed Income for the rest of her life. This income she CANNOT OUTLIVE!

This is what we mean when we say Greco Brokerage Shopping Products and Price for Our Clients!

 

Case Study #1

54-year-old man from Pennsylvania

 
This case study involves a male client age 54 who is a non-smoker and in excellent health. However, three years prior to our business together, this man had suffered a traumatic brain injury which left him hospitalized for two months. During this hospitalization, the man was placed in a induced coma and had cranioplasty surgery where part of his skull was removed and he needed to have it reattached months later after an intense rehabilitation program.

An avid believer in life insurance, the man bought policies in different situations and for different needs over the years, resulting in a total of 9 life insurance policies with 5 different, very recognized insurance companies. His annual premiums for these 9 policies totaled $10,540.00 annually for a total of $4,000,000 (four million dollars) of coverage. When this man wanted to consolidate his coverage to one policy with the same $4 million benefit, he found some resistance due to his previous brain injury.

That’s where Greco Brokerage came in.

We contacted several insurance companies through our field marketing organizations until we found the right product and price for this client. Ultimately, we were able to secure him the $4,000,000 policy that he sought with a top-rated company and with in the best possible rating class of “Preferred Plus”. Best of all, we were able to actually reduce his annual premium down to $7,165.00 (from the original total of $10,540.00) for a savings of $3,375.00 per year. Bottom line: over the course of the next 15 years of this term policy, this client will save a total of $50,625.00 while maintaining the same benefit.

This is what we mean when we say Greco Brokerage Shopping Products and Price for Our Clients!