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Guidelines |
Routine Requirements |
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Percentage of ownership times corporate value and/or five to 10 times average net earnings for past two years. To determine market value, we will use capitalization of net income. Capitalization is from two to 10 times, depending on the proven record of the business. |
Always needed: Gross annual earned income on the application. For cases $250,001 or more: A financial questionnaire will be requested. Third party financials from a CPA will be required for applications of $2 million or greater. Examples are a current income statement and balance sheet. Underwriter may also request a copy of the Buy/Sell agreement. Some cases may require business and/or personal tax returns. Note: Any other type of financial information can be requested at the underwriter’ discretion. |
Buy/Sell partnership, stock purchase, stock redemption, entity purchase and cross-purchase all describe coverages sought to preserve existing assets from forced liquidation upon the unexpected or untimely death a business owner or other business associate.
Buy/Sell agreements fall into two categories: cross purchase, and entity. Cross purchase allows individual owners to purchase insurance coverage on other owners. An entity agreement allows the business to purchase and own all coverages.
A Buy/Sell agreement details the specifics of the agreement between the business associates involved. Two major considerations for a Buy/Sell agreement are the identification of major principles in the business, and their respective ownership positions; and a determination of the market value of the business. Partners or owners are considered for insurance in proportion to their percentage of ownership in the business.