Business solution
Succession is planned. Is it protected?
A business transfer spans five to ten years: freeze, gradual sale, vendor take-back paid from profits. If the founder or successor dies or becomes disabled during that time, the whole transaction wobbles. Insurance guarantees each step.
- Vendor take-back guaranteed
- Successor protected, founder reassured
- Estate freeze funded
Connect with a partner financial security advisor.
In most SME transfers in Quebec, the seller finances part of the price: the successor pays over several years from profits. If the successor dies or becomes disabled, payments stop and the retired founder gets back a business with no pilot. If the founder dies before the freeze is complete, tax lands at the worst time.
The solution
- 1
Insure the vendor take-back
Life and disability insurance on the successor, for the benefit of the seller (or the company), for the declining balance. The seller is paid no matter what.
- 2
Insure the founder during the transition
The founder's know-how and relationships remain critical during transition: temporary key person coverage bridges the period.
- 3
Fund the freeze tax
The estate freeze fixes the taxable value of the founder's shares: permanent insurance, often corporate-owned, funds the tax at death.
- 4
Agreement and succession aligned
The revised shareholders' agreement provides for death and disability on both sides, and insurance supplies the money.
A 64-year-old founder sells his services company to his 42-year-old general manager for $3M: $1M cash financed by the bank, $2M balance paid over 8 years. A $2M decreasing term life policy and a buy-sell disability policy on the manager guarantee the balance; $500,000 of key person coverage on the founder covers the 24-month handover. Both sleep well.
Illustrative: structure and amounts depend on the sale agreement, financing and taxation. Build it with the lawyer, accountant and partner advisor.
Who it is for
- Founders selling to their children or executives with a vendor take-back
- Successors borrowing to acquire the business
- Companies in the middle of an estate freeze
- Families where one child takes over and others do not (see also estate equalization)
Transferring your business within five years?
A partner advisor maps the transaction's risks and quantifies protection for each step.
Unprotected transfer vs insured transfer
Common mistakes
- 01
Signing the sale before insuring
Medical underwriting takes weeks: start it before closing, not after.
- 02
Forgetting disability
A 42-year-old successor is more likely to become disabled than to die before 65.
- 03
Not reducing the policy with the balance
Paying for $2M when $400,000 remains wastes premiums; decreasing term follows the balance.
Points to consider
- The insured amount must follow the declining balance: decreasing term or annual review.
- The successor's disability is the most frequent and most forgotten risk.
- Policy ownership (seller, company, successor) has tax effects: validate.
- Intergenerational transfers benefit from specific tax rules (Bill C-208 and follow-ups): the tax specialist decides.
The solutions presented are for information only and rely on current Canadian and Quebec tax legislation, which may change. Sommet Protection gives no financial, tax or legal advice: the analysis is done by a partner financial security advisor, together with your accountant and legal advisors.
Frequently asked questions
The bank already requires insurance on the loan. Is that enough?
The bank's creditor insurance protects the bank, not the balance you finance yourself nor business continuity. It is also often more expensive and not transferable.
Who pays the premiums?
Most often the successor or the company: it is the price of the seller's security, negotiated in the agreement.
Protecting the business you built: the insurance guide for owners and the self-employed
The five risks that close profitable SMEs, and how to fund them for a fraction of their cost.
Read the guide- 8 chapters
- 1. You are the most important asset — and the least insured
- 2. A partner's death: the scenario that divides families
- 3. Disability: three protections, three different roles
- 4. The key person worth 30% of revenue
- 5. Debts, guarantees and lenders
- 6. Tax at death on shares: the founders' file
- 7. A health plan for your incorporated company
- 8. Where to start
The solutions
Key person insurance
Protect the business from losing the person it depends on.
Learn more →Shareholders' agreement
Fund the buyout of a deceased or disabled partner's shares.
Learn more →Self-employed disability
Replace your income when you can no longer work.
Learn more →Business overhead expense
Pay rent, salaries and loans during your disability.
Learn more →Business critical illness
A lump sum for the company or owner at diagnosis.
Learn more →Tax at death on your shares
Fund the tax on your company's value so the successors don't have to sell.
Learn more →Loans and personal guarantees
So the business's debt never becomes your family's.
Learn more →Health and key employee retention
Protect and retain your essential executives with company-funded benefits.
Learn more →
Let's talk about your business
A partner SME specialist advisor calls you back for a no-fee diagnosis. Bring your shareholders' agreement and financial statements: the advisor quantifies with you.