Statistically, a person is up to ten times more likely to become disabled than they are to die prematurely. In the case of businesses and their owners, this means that is especially important to insure against one owner becoming disabled and unable to continue running the business. A disability buy-out insurance policy enables either the remaining owners, or the business entity itself, to buy-out the disabled owner’s share of the business at an agreeable price.
Disability buy-out insurance provides benefits for all parties.
It is most common for a disability buy-out policy to offer a lump sum payment. This money is then used to complete a buy out in one installment. However, it is possible to arrange for the disabled partner to receive their payment in multiple installments, but this needs to be agreed when the policy is first placed in force.
Not all disabilities or illnesses last a lifetime. The majority of disability buy-out insurance policies include an elimination period consisting of between one and two years. This period helps to limit the impact of the disability on the business, and it also allows the disabled owner time to determine whether or not they will be able to consume normal duties or whether a buy-out is the best solution for all concerned.
Disability buy-out insurance provides a safeguard against a possibility that nobody really wants to consider. However, should one or more owners of a business suffer a disability it can cause a major strain not only on the stricken individuals, but also on the remaining owners and the business itself. Disability buy-out insurance works to ease this strain and provide a beneficial solution for all parties.