What type of insurance policy may be used to fund a buy-sell agreement?

A buy-sell agreement is a legal contract between business partners that stipulates how ownership of a business will be transferred if one of the partners passes away or becomes incapacitated. The purpose of using life insurance in this context is to ensure that there are sufficient funds available to buy out the deceased partner's share from their beneficiaries.

Any form of life insurance can be utilized to fund a buy-sell agreement, as long as it meets the specific needs of the business and its partners. For instance, term life insurance provides coverage for a specific period, making it an affordable option for partners. Whole life insurance, on the other hand, provides coverage for the entirety of the insured's life and carries a cash value, which can also be beneficial in funding the agreement.

Universal life insurance offers flexibility in terms of premium payments and death benefits, which might suit certain financial strategies of a business. Therefore, using any form of life insurance in a buy-sell agreement is valid since it ultimately serves the same purpose of providing liquidity to fund the buyout of a deceased partner's interest in the business.