Free Educational Tool
How much life insurance funds your buy-sell — and who insures whom?
A buy-sell agreement is the contract that decides what happens to an owner's share of the business when they die, leave, or become disabled. Life insurance is what makes the contract fundable — it puts cash in the right hands at the moment a share has to change hands. The amount is arithmetic once you fix two things: what the business is worth and how the agreement is structured. This tool runs that arithmetic for the three common structures, and for a cross-purchase it lays out the exact policy each owner carries on each other owner. Coverage need only — no premiums, no quotes.
Part of our guide: Buy-sell agreements that actually hold up →
The number is easy; the structure is the decision
Sizing the funding is straightforward: each owner's buyout obligation is their ownership percentage of the agreed business value, and the total coverage across the agreement equals the full value being bought out.
Why the structure, not the number, is the real decision
What actually drives the design is how the agreement is structured, because the structure decides who owns which policy — and that has real cost and tax consequences.
In a cross-purchase, each owner personally insures every other owner, so on a death the survivors have the cash to buy the departing share directly. The survivors get a cost-basis step-up in what they buy — valuable later if they sell — but the policy count grows as N × (N−1): two owners need two policies, three need six, four need twelve. With unequal ownership the individual face amounts get intricate, because survivors buy the departing share in proportion to their existing stakes — which is exactly the grid this tool builds for you. In an entity redemption, the business itself owns one policy per owner and buys the shares back. The count is simply N, far cleaner, but survivors generally get no basis step-up, and redemptions carry their own tax considerations. A one-way agreement covers a single designated buyer purchasing from a single owner — one policy, used when there is one clear successor.
This tool sizes the need and shows the structural tradeoff side by side. It does not draft the agreement or value the business — those are your attorney's and your CPA's work, and the funding only works when all three move together.
Size the funding
Your business and owners
All estimates. Nothing is sent anywhere — this runs entirely in your browser.
The business
The agreed or appraised value is an input here, not something the tool produces. Your CPA or a valuation professional establishes it; the buy-sell agreement should state how it is set and refreshed.
The owners
Enter each owner's share. Names are optional and only label the results below. If the percentages don't total 100%, the tool normalizes them and flags it.
Total buy-sell funding need
$0
Enter the figures above to size the agreement.
| Enter a value and ownership splits | — |
Who insures whom — cross-purchase policy grid
Read across a row: the face amount that owner carries on each other owner. Each column sums to the insured owner's buyout value. Blank diagonal — no one insures themselves.
Cross-purchase
0 policies
Owners insure each other. Basis step-up for survivors; policy count grows fast as owners are added.
Entity redemption
0 policies
The business insures each owner. Simplest to administer; generally no basis step-up, and redemptions carry their own tax rules.
One-way
0 policies
A single successor buys out one owner. Used when there is one clear buyer rather than mutual owners.
Structure consideration · Connelly (2024) A company-owned buyout policy can raise each owner's taxable estate — see what it may cost
You've chosen an entity redemption, where the business owns the policies. In Connelly v. United States (2024), the Supreme Court held that company-owned life insurance used to redeem a deceased owner's shares is added to the company's value, and the obligation to redeem does not offset it. So a deceased owner's shares are valued as a slice of the larger company — which can raise the estate and the tax on it. Using the policy sizes this tool already computed:
Educational estimate only — it applies the top federal estate-tax rate (40%) to the estimated inflation and matters only if the estate is federally taxable. Whether Connelly affects you, and whether restructuring makes sense, is your attorney's and CPA's call. The deeper background is on the Connelly buy-sell review.
Where this fits
Funding is one seat at a three-party table
A buy-sell only works when three pieces of work line up.
The three pieces — attorney, CPA, and funding — and two adjacent needs
The attorney drafts the agreement — the triggers, the valuation mechanism, the structure. The CPA establishes and refreshes the value and handles the tax treatment of the structure you choose. And the funding — the part this tool sizes — has to match both: the right amount, owned the right way, so the cash arrives where the agreement says it should. When those three are coordinated, a death or departure is an administrative event; when they aren't, it becomes a dispute.
Two adjacent needs often surface in the same conversation. If the business also depends on a non-owner whose loss would set the company back, that is key-person coverage — a separate calculation from buying out a share. And if the company carries SBA or other lender debt, the lender may require its own coverage as a loan condition, which our SBA loan insurance calculator sizes specifically. Getting all of these to coexist without over-insuring is the planning work. More on how we coordinate with your attorney and CPA is on the business owners page.
Already have a buy-sell — but is it funded?
A surprising number of agreements are signed and then never funded, underfunded for a value that has since grown, or funded in a structure that no longer matches the entity. We review an existing agreement's funding in writing — whether the coverage matches the obligation, and whether it is owned correctly — at no fee.
How the second opinion works