When business owners enter into a company protection policy such as a shareholder or partnership protection policy, a cross option agreement can come into play. Also known as a double option agreement (or single option agreement in the case of critical illness cover) this type of agreement can help guarantee the transaction between the life insurance payout and the business shares.

A cross option agreement is an agreement entered into by all the shareholder. It is put in place to ensure that the sale of the share goes smoothly. Each shareholder takes out a policy on either themselves, where the money goes to the remaining shareholders or on each other, where the money goes back to themselves.

This agreement is then put in place for shareholders to grant each other put and call options over the shares. Each partner agrees to co-operate fully during a claim. It also gives each shareholder the option to purchase life insurance to protect the business.