SBA 7(a) Q&A
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.
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.
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.
Last reviewed 2026-06-15 · SBA sources checked through 2026-06-15. DealRoom analysis of business life-insurance and SBA collateral-insurance practice (SOP 50 10 8). Not insurance, legal, or tax advice. Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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This page answers “Who typically pays the premiums for life insurance policies used to fund a buy-sell agreement?” for SBA 7(a) business buyers — a short answer, the detail, and official sources — from DealRoom.so SBA Intelligence. It is general information, not legal, tax, or financial advice, and DealRoom is not a lender.
Source: DealRoom.so SBA Intelligence, based on public SBA, lender, franchise, FDIC, and related records. DealRoom is not a lender and does not guarantee financing.
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