There are several occasions when life insurance is essential to ensure the continuity or successful transition of a company with more than one owner. Life insurance can be used to finance purchase agreements, as well as partnership acquisitions.


StateTrust Life & Annuities offers several products that can be used to finance purchase agreements or partnership acquisitions. These products include:

Product Name Product Type Description
Lighthouse Term Life Insurance This life insurance product provides coverage with capped premiums during the life of the policy. This plan does not include an investment component, thus offering the insured amount at the lowest available cost.
Sentinel Life Insurance with Return of Premium This life insurance product provides coverage with capped premiums during the life of the policy. This policy will provide financial resources to your family in case of premature death. In addition, at the end of the coverage period, you will be reimbursed all premiums paid.
Legacy Variable Universal Life Insurance This policy combines variable life insurance with universal life insurance. It is a popular product, since it provides insured parties the flexibility to invest, while enjoying the benefits of insurance coverage. This policy provides the ability to invest in the world's major capital markets and may be adapted to your present and future protection and investment needs. This product protects both the inheritance and the family estate for succession planning purposes.
Compass Index Indexed Universal Life Insurance This policy provides the policyholder with insurance coverage, as well as an opportunity to allocate investments in the S&P500. It provides a guaranteed minimum return every 24 months (primary protection), and a share percentage in this index's growth.
Global Dynamic Protection Indexed Universal Life Insurance A universal indexed life insurance plan with flexible premiums, which combines the protection of a life insurance policy with an investment component.

Purchase Agreements: In business co-ownership situations, an ideal solution for cases of disability or death of one of the owners is having a purchase agreement drawn up before either of these situations takes place.

Key provisions in purchase agreements:

  • When an owner plans to sell their business shares, other owners or the company itself will have the right of first offer to purchase them.
  • The purchase price of a business owner's stake is based on a predetermined formula (another alternative is conducting a current business valuation, which would establish the fair market value of the business). This allows determining a specific purchase price for the business in the event of death or incapacity of the owner, as well as any valid grounds to terminate the agreement.
  • Specific instructions on how to manage the dissolution of the company are also established.
  • Financing mechanisms, such as life insurance and disability insurance are also defined.
  • A systematic process to update business appraisals and adjust financing mechanisms, such as life insurance, is also established.

Advantages of purchase agreements:

  • They provide a smooth transition and business/management continuity to the other business owners.
  • They establish payment terms and may be financed with life or disability insurance.
  • They establish a fair market value for federal property taxes purposes, which is used by the Internal Revenue Service.
  • They provide liquidity for the business owner's family or inheritance.
  • The company is both the owner and beneficiary of these policies.

When a member leaves a partnership voluntarily or due to disability or death, the consequences can be devastating for those who stay to manage the business. This is why it is essential to have a purchase agreement in place, which can be financed through the use of life insurance.

The events that may trigger a purchase agreement are as follows:

  • Retirement or resignation of a partner.
  • An attractive offer from a third party to buy a partner's share in the business.
  • A divorce agreement in which the ex-spouse of one of the partners is entitled to receive a stake in the company.
  • The execution of a debt guaranteed by company shares.
  • Bankruptcy of a partner.
  • Death or incapacitation of a partner.

With insurance products that have an investment component, payments can be structured for each of these situations. In cases of death of a partner, a term life product can also be used.

Reality of purchase agreements for company shares:

  • A well-established purchase agreement can help alleviate many problems.
  • The most efficient way to fund this type of agreement is through a life insurance policy.
  • If one of the partners dies, the shares of the deceased partner would be acquired by the surviving partners as part of the purchase agreement.
  • The benefit paid by the policy is used to purchase the shares.
  • Temporary and Permanent Life Insurance can be used for this purpose.