Cross-purchase policy count
Certified Financial Planner glossary · Certified Financial Planner
Definition
Cross-purchase requires N(N-1) policies; entity redemption requires N.
Cross-purchase policy count in plain English
Four partners want a cross-purchase buy-sell funded with life insurance and someone orders "one policy each." Cross-purchase needs N(N-1) policies; entity redemption needs only N. Four partners therefore need 12 policies under cross-purchase versus 4 under entity purchase. When N(N-1) becomes operationally absurd, recommend entity purchase and still watch transfer-for-value traps. Count the directed insured-and-owner pairs before you endorse the design.
Related Certified Financial Planner terms
Certified Financial Planner practice questions · Certified Financial Planner flashcards · Certified Financial Planner study guide