In a Cross Purchase Plan, each owner applies for, pays the premium for, and is the owner and beneficiary of the policies on, the other owner(s). The example illustrates that should Owner A die or become disabled, Owner B receives the cash from the insurance company and purchases the business interest from Owner A or his or her estate, according to the terms of the buy-sell agreement.

As a result, Owner A or his or her heirs receives the full value of the business interest in cash, and Owner B assumes full control. Though this arrangement works efficiently when there are just two or three principals, it can become cumbersome in larger businesses. For example, if four businessowners enter into a cross purchase buy-sell agreement, they will each buy policies on the three other principals. Thus, 12 separate disability policies would be needed! If life insurance is also included, the total number of policies would be 24!