sold to a partnership
. Most often, this insurance is purchased to aid the business
in case of the death
or dismemberment of one partner
. There are two plans most often used in partnership insurance. Under a cross purchase plan
, each of the partners purchases life insurance
on the other, with themselves listed
as the beneficiary
. If one partner dies, the surviving partner uses the payout of the life insurance to purchase the deceased partner's interest
in the company
. This type of plan works best for a company with only two partners, while an entity
plan works better for a team
with multiple partners.
Under an entity plan, the partnership purchases the life insurance policies on each partner, and is the beneficiary on each policy
. Should one partner die, the partnership uses the insurance payout to buy the deceased person's interest.