Buy-Sell Insurance

Buy-sell insurance (also called succession insurance or business succession insurance) is a business protection strategy using life insurance, TPD insurance, and trauma insurance to fund the purchase of a business owner's share when they exit due to death, disability, or critical illness. Multiple business partners or shareholders enter into a legally binding buy-sell agreement establishing the terms, valuation method, and trigger events for ownership transfer. Each owner is insured (using life, TPD, and/or trauma insurance), with policies structured in one of three ways: cross-ownership (each partner owns insurance on the others), self-ownership (each owner holds insurance on themselves, with business or partners having option to purchase), or company ownership (the business owns insurance on all owners). When a trigger event occurs, the insurance provides immediate funds for the remaining owners to purchase the departing owner's share at a pre-agreed price, ensuring the family receives fair value while surviving owners maintain control without needing to find external financing. This prevents forced sale scenarios, protects the business from unwanted new partners, ensures continuity for employees and clients, and provides financial certainty for all parties. Australian taxation of buy-sell arrangements is complex, with different tax consequences depending on structure, and professional advice is essential. The insurance can cover death, TPD, trauma/critical illness, and sometimes total and temporary disability. Buy-sell insurance is critical for professional partnerships (medical practices, law firms, accounting firms), family businesses with multiple siblings involved, and any multi-owner business where continuity matters. Regular policy reviews are necessary to ensure insured amounts match current business valuations.