What Is Cross Purchase Life Insurance?

  1. 4330 POINTS
    Jerry Vanderzanden, CLU, ChFC
    Co-Founder, Coastal Financial Partners Group, California
    In a business with, say, two equal shareholders, life insurance can be cross-owned to fund a written cross purchase buy-sell agreement. Shareholder A owns, and is the beneficiary of, a policy on the life of shareholder B. B buys a policy on A in the same way. If B dies, the buy-sell agreement would normally provide that A buys the shares of B. The life insurance proceeds A receives income tax free would provide the cash necessary to meet this obligation.
    Answered on May 6, 2013
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  2. 63333 POINTS
    Peggy Mace
    Most of the U.S.
    Cross purchase life insurance would be the life insurance policy used to fund a buy-sell plan. In a buy-sell plan funded by cross purchase life insurance, each business owner purchases a life insurance policy that would pay them the amount it would take to buy out the others, if their partner(s) died.
    Answered on October 20, 2014
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