What is the purpose of a Buy-Sell Plan?

A Buy-Sell Plan is fundamentally designed to manage the ownership transition of a business in the event of an owner's death, disability, or retirement. It provides a structured mechanism for the remaining business partners or owners to buy the departing owner’s share of the business, thus ensuring that the company can continue to operate smoothly without disruption.

The plan typically includes life insurance policies that fund the purchase of the deceased or disabled owner's interest in the business, thereby providing liquidity so that the surviving owners can buy the shares without financial strain. This setup aims to protect the interests of both the remaining owners and the estate of the exiting owner, ensuring the business remains stable and can sustain its operations.

Other options do not align with the primary purpose of a Buy-Sell Plan. While sharing insurance costs, providing temporary coverage, and ensuring future payments after retirement are all valid concepts in various insurance contexts, they do not encapsulate the essential function of a Buy-Sell Plan, which is primarily focused on the continuity of business ownership and management.