Nathan and Mark Rykse, brothers in their mid-thirties, own Rykse's, a restaurant, bakery, and catering company in Kalamazoo, Mich. They're as savvy about their finances as they are about food. Several years ago they set up a buy-sell agreement to protect their young families and the company if either partner dies. They funded the buy-sell by each purchasing $500,000 worth of coverage in the form of an adjustable life-insurance policy.

Jeff Van Strien, an insurance expert with the Principal Financial Group, in Grand Rapids, Mich., explains that the policies' flexibility -- their value can increase as the company becomes more successful -- makes sense for cash-strapped owners of growing companies. "Policy holders can increase the size of their premiums when it becomes affordable and desirable."

Paying higher premiums accomplishes one of two possible goals:

increasing the death benefit, which makes sense for entrepreneurs like the Rykses as their business grows in value (which would mean the buy-sell would cost more to carry out); or

increasing the cash value, or investment buildup, of the policy. Since the cash value accumulates, tax deferred, until the insurance holder cashes it in, that option makes a good retirement- planning vehicle.

Adjustable life policies are an easy way to obtain some coverage, especially for companies that are too small to have their own 401(k) retirement plans. They have another advantage: "Once the holders have qualified for coverage, they never have to go through the medical tests again," says Van Strien.

The Rykse brothers have raised their annual premiums from $850 three years ago to about $1,250 today. "It's been a wonderful way to prepare for our retirement as well as plan for the buy-sell," says Nathan Rykse. "Too many small-business owners tell themselves that their businesses will solve all their long-term financial needs."