{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/who-typically-pays-the-premiums-for-life-insurance-policies-used-to-fund-a-buy-sell-agreem","api_url":"https://dealroom.so/api/public/questions/who-typically-pays-the-premiums-for-life-insurance-policies-used-to-fund-a-buy-sell-agreem","question":"Who typically pays the premiums for life insurance policies used to fund a buy-sell agreement?","topic":"Business life insurance & protection","audience":"borrower","bot_mode":"buyer","short_answer":"The responsibility for paying premiums on life insurance policies funding a buy-sell agreement depends on the structure: in a cross-purchase, each owner pays premiums on policies they own on other owners; in an entity-purchase, the business pays premiums.","rule":"For cross-purchase agreements, individual owners are responsible for paying premiums out of their personal funds. For entity-purchase agreements, the business uses its funds to pay the premiums. The chosen structure has tax and administrative implications.","example":"In a cross-purchase agreement with two partners, Partner A pays the premiums on the policy covering Partner B, and Partner B pays the premiums on the policy covering Partner A. In an entity-purchase, the company, LLC or Corporation, pays the premiums for policies on both A and B.","what_lenders_check":"Lenders are not directly involved in premium payment but assess the business's cash flow to ensure that premium obligations for any business-owned policies are sustainable. For individual-owned policies, it's a personal financial commitment.","required_facts":["Cross-purchase: owners pay","Entity-purchase: business pays","Tax implications","Administrative burden"],"source_families":[],"official_sources":[],"related_questions":[{"question":"What is key-person life insurance and why is it crucial for small businesses?","url":"https://dealroom.so/sba-7a/questions/what-is-key-person-life-insurance-and-why-is-it-crucial-for-small-businesses"},{"question":"Who should a business identify and insure as a key person?","url":"https://dealroom.so/sba-7a/questions/who-should-a-business-identify-and-insure-as-a-key-person"},{"question":"What is the typical amount of key-person life insurance coverage needed?","url":"https://dealroom.so/sba-7a/questions/what-is-the-typical-amount-of-key-person-life-insurance-coverage-needed"},{"question":"Who owns and is the beneficiary of a key-person life insurance policy?","url":"https://dealroom.so/sba-7a/questions/who-owns-and-is-the-beneficiary-of-a-key-person-life-insurance-policy"},{"question":"What are the tax implications of key-person life insurance premiums and benefits?","url":"https://dealroom.so/sba-7a/questions/what-are-the-tax-implications-of-key-person-life-insurance-premiums-and-benefits"},{"question":"Why would a buyer require life insurance on a seller during business acquisition?","url":"https://dealroom.so/sba-7a/questions/why-would-a-buyer-require-life-insurance-on-a-seller-during-business-acquisition"}],"related_terms":[{"term":"Buy-Sell Agreement","url":"https://dealroom.so/glossary/buy-sell-agreement"},{"term":"Life insurance","url":"https://dealroom.so/glossary/life-insurance"},{"term":"Universal life insurance","url":"https://dealroom.so/glossary/universal-life-insurance"},{"term":"Life insurance requirement","url":"https://dealroom.so/glossary/life-insurance-requirement"},{"term":"Life insurance collateral","url":"https://dealroom.so/glossary/life-insurance-collateral"},{"term":"Whole life insurance","url":"https://dealroom.so/glossary/whole-life-insurance"}],"related_tools":[{"name":"Life insurance coverage estimator","url":"https://dealroom.so/seller-life-insurance#ins-estimator"},{"name":"Request insurance quotes","url":"https://dealroom.so/seller-life-insurance#ins-quote"}],"data_freshness":{"last_reviewed":"2026-06-15","sba_rule_sources_checked_through":"2026-06-15"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/who-typically-pays-the-premiums-for-life-insurance-policies-used-to-fund-a-buy-sell-agreem","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}