In today's rapid business pace, even successful companies may forget simple strategies that are essential to long-term success—especially in business continuation planning. This case study demonstrates how using the Guardian Business Resource Center not only revealed a gaping hole in protection but also added real value for both the producer and their client. We had a situation on a successful company with two equal owners. The producer requested that I take a look at a disability insurance policy on one of the owners. While speaking with the founder, I asked some questions about the company structure, their buy-sell agreement, and how the agreement was funded. It transpired that there had indeed been a buy-sell agreement, but the agreement had never been funded. This was where the business was potentially looking at a severe cash flow problem if one of the partners died or was suddenly disabled.
After presenting the reasons why proper funding is needed to protect each owner's interests, the client decided to move forward. With their approval, we obtained the required financial data—tax returns, profit and loss statements, and a balance sheet—and began an informal business valuation through Guardian's Business Resource Center. The valuation showed the current fair market value of the business, demonstrating how much life insurance each partner needed to properly fund the buy-sell agreement.
Most business owners believe they will be able to finance a buyout through savings or future profits, but the most cost-effective and immediate solution is to use life insurance. Not only does it create liquidity at death, but it also allows the surviving owner to purchase complete ownership of the business without incurring debt or liquidating assets. As we got further in, it was apparent that there was no disability funding either.
We suggested the idea of a disability buy-out policy to advance the interests of both partners in case one becomes permanently disabled. The team from the Guardian Business Resource Center helped significantly by reviewing the buy-sell agreement so that the policy's language matches the contract language. This method risks getting noticed during an audit and may even cause arguments if things change. Adequately funding a buy-sell agreement with disability buy-out insurance provides liquidity, tax efficiency, and certainty—safeguarding the business and both partners' interests.
After these gaps were filled, we returned to the initial request—individual disability insurance for the owner. By now, the discussion had moved beyond a single product. We assisted the business owners in recognizing and filling a structural flaw in their overall plan. Instead of patching an issue with a single policy, we offered a comprehensive solution that protected the future of their company.
This case illustrates an important principle: Client success is about more than just selling a policy—it's about uncovering risks, educating clients, and using strategies that address real issues. By utilizing the resources at Guardian, we helped the producer build a more solid relationship with the client and provide solutions that exceeded their expectations. All businesses go through four stages—Start-Up, Growth, Maturity, and Transfer/Exit. During each stage, business owners have different issues and planning requirements. If there are multiple owners, it is absolutely vital to have a Buy-Sell Agreement. However, that is not enough. Without strong financing from Life and Disability Insurance, the agreement is nothing more than a plan on paper. If you’re not yet leveraging the Guardian Business Resource Center, you’re leaving a powerful tool on the table. With its help, you can elevate your service, bring real value to business-owner clients, and deepen your advisor relationships.
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