New Owner Insurance Product Promotes Business Continuity

October 23, 2006 ( - The Advanced Markets unit of John Hancock Life Insurance Company has released a new business continuation product - the Cross-Endorsement Buy-Sell plan - which provides insurance for business owners in the event a co-owner dies.

According to a press release, the new product combines the concepts of Split Dollar arrangements and Buy-Sell planning, to allow each owner to own the life insurance policy (and its cash value) on his or her life, while insuring against the loss of business due to another owner’s death. In a traditional cross-purchase buy-sell agreement, one business owner purchases a life insurance policy on the other owners to be able to purchase the business shares of the other owner at the time of his or her death.

The new product, according to the press release, eliminates the disadvantages of traditional buy-sell plans such as:

  • the owners do not own a policy on their own life.
  • at retirement, the owners must transfer the policies to the insureds, creating tax issues.
  • in the case of more than two owners, each owner must purchase a separate policy for each of the other owners.

With the cross-endorsement buy-sell plan, because each business owner owns his or her own policy, he or she can also use the policy to fund a lifetime buyout of the business due to disability, for retirement income, or estate planning, the press release said. Even if there are multiple owners, each owner only has to buy one policy.

As part of the new product launch, John Hancock is also releasing a new John Hancock Solutions module to illustrate the cross-endorsement buy-sell plan along with marketing materials to complement the illustrations. Using summaries, flowcharts, and graphs, producers can familiarize clients with the cross-endorsement buy-sell plan concept, and then present data and calculations illustrating a client’s specific situation for those clients who are interested in purchasing the product, the announcement said.

For more information, call John Hancock’s Advanced Markets Group at 888-266-7498, option 3.