Funding a Buy-Sell Agreement with Life Insurance

September 22, 2021 By Amy Hammond Leave a Comment

Life rarely goes according to plan. An unexpected death, disability, divorce, or another event can derail a business and create a huge financial impact on its success. Your business is likely your biggest investment and the future resource for funding your retirement.

All businesses should prepare for a multitude of issues that could put the future of the business in danger. For instance, who would manage/own the business upon retirement or unexpected death/disability of an owner? Is there an internal candidate who is experienced enough to manage the business, or would the business need to be sold to an outside competitor? What about your family’s needs regarding the business?

A buy-sell agreement is an excellent solution to this risk. It is simply a “will” for how you want the business to transition on Your Terms based on certain triggers such as retirement, death or disability.

There are options for funding a buy-sell agreement, but some options open the door to other problems.

A company savings account would pay cash when an owner dies, but if death unexpectedly occurs, there may not be enough funds in the account to carry the business.
A loan could be obtained at the time. Unfortunately, interest could be high and it may create unnecessary risks for the surviving owners and business.

The best option to fund a buy-sell agreement is a life or disability insurance policy. These types of policies allow for instant cash/liquidity to be used in either continuing the business or preventing a fire sale, allowing proper time for a buyer to be found. Other advantages include: death benefits proceeds are generally income tax free, funds are purchased for pennies on the dollar, and premiums are likely to be significantly lower than loan interest.

Life insurance also offers the option of a Cross-Purchase Plan or an Entity Plan. In a Cross Purchase Plan, each owner purchases a life insurance policy on all other owners and is named beneficiary. In an Entity Plan the business purchases a life insurance policy on each owner and is named beneficiary of plan allowing the business to buy shares stock redemption style, preventing other owners from paying out of pocket.

Both a Cross Purchase Plan and an Entity Plan offers flexibility such as:

Price fixing, formula, or appraisal (most important! Establish fair market value of stock or business at time of agreement.)
Pay in cash or installment.
Different terms for different events (different prices for retirement, death, disability, etc).

Having a buy-sell agreement is imperative. Preparing one in advance eases negotiations and agreements as no one is sure what the next day will bring.

If you would like more information on how a life insurance product could fit into your business plans, contact Abbey Bowersox today at 727.522.7777 or by email at abowersox@w3ins.com.

Is Your Golf Course In Danger?

June 9, 2016 By David Cosper Leave a Comment

With the presence of Arnie in the 60’s, Jack in the 70’s, and Tiger since 1996, the game of golf has grown into one of America’s favorite past-times. According to the National Golf Foundation, an estimated 25.7 million Americans played at least one round of golf last year. The game is no more popular than in the state of Florida. According to the AARP, our great state has 1055 golf courses.

Golf club owners, managers, and superintendents have an invaluable amount of real estate to protect in order for Floridians to continue playing our courses. This actual experience below brings to light potential exposures, where you may think your insurance agent and insurance provider are going to protect you in the event you suffer a loss.

A client of ours was recently exposed to the outer rain bands of the season’s first tropical storm. I recall emailing him the night prior to express concern over his property and to reassure him of our commitment to protect his business in the event they suffered a loss. He woke up the next morning to something out of a horror movie. His facility had suffered 6 inches of rain and experienced significant washout of many of his bunkers, flooded fairways, downed trees, and backup from many of the course drains due to debris. Without a doubt, the club had sustained significant damage!

A major washout near the tee area of a local golf course after a recent storm.

Is your club prepared to deal with this sort of catastrophe?

More importantly, does your agent representative truly know how to interpret the policy they sold you and can they help remedy the situation so that you may re-open and restore the integrity of your golf club in an expedited manner?

Wallace Welch & Willingham has extensive expertise insuring Golf and Country Clubs throughout Florida. We are prepared to be your partner in times of need and have every resource available to help you get back in business when disaster strikes.

David Cosper | Hospitality and Risk Practice Leader

727.522.7777 ex 110 | dcosper@w3ins.com

6 Steps to Reduce Your Risks when Entertaining

November 12, 2015 By Michelle McKinley Leave a Comment

Tis’ the season for entertaining! The fall season begins a slew of gatherings with friends and family. Unfortunately, it can also open you up to risks. As a homeowner, you are responsible for anyone on your property, invited or not. Injuries that could be caused due to your negligence will put you and your family at risk. Your homeowners policy does protect you from liability, but only up to a certain dollar amount. Additional insurance can and should be purchased to offer more protection.

Steps To Take To Reduce Risk

Mitigating risk is something we talk about a lot in the insurance industry. It’s important to know your risks and how to reduce them. While accidents do happen, there are certain things you can do to help lessen them. Here are five ways to help your party goes off without a hitch (or claim).

Check your home for possible safety hazards. Before guests arrive, do a walk-through of your entire property and look for potential hazards. Do you have a step on your porch that is hard to see? Consider adding more light in that area to help light the way. Maybe you had left a garden hose out in the yard where a guest taking a short cut might trip. Make sure all tripping hazards are put away. What about guest seating? Do you have a piece of furniture that you’ve been meaning to get fixed? Bring that item to the garage or other out-of-the-way area to ensure that it is not used. As a homeowner, it‘s your responsibility to provide a safe environment for your guests.
Hire a professional bartender to serve alcohol. Professional bartenders are relatively inexpensive and often carry their own liquor liability. They have been trained to spot when someone has had too much to drink. They know when to stop serving and inform the host of concerning situations. Be aware that larger events that will need to have event insurance as homeowners insurance will likely not cover personal liability. Special Events Coverage through your insurance agent. This coverage provides General Liability coverage for events over one day in duration, up to 100 attendees, such as weddings or New Year’s Eve parties at your home.
Offer Taxi or Uber rides for your guests. Serving alcohol opens you to a whole host of liability. Your guests driving home while under the influence is a big no-no. Having the number handy of several taxi or Uber drivers will help keep your guests safe. Consider having everyone put their keys in a bowl and attach a card with the taxi phone number right to their car keys.
Have plenty of food and water available for guests. Staying hydrated throughout the day/night will help your guests more than you think. Stage several areas throughout your home for easy access to non-alcoholic beverages. Water, lemonade, and seasonal hot cider are all good choices.
Check your homeowner’s insurance policy limits and restrictions. Umbrella polices that offer additional coverage/higher limits and special event insurance are the best ways to help mitigate your risk. There are many instances where your homeowners insurance will not cover you at all if an accident occurs because of a party on your premise. It’s important to establish a good relationship with your insurance agent and to verify if additional coverage is needed for a special event.

Please contact your Personal Insurance Advisor if you have any questions about your homeowners policy.