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.
The Benefits of Disability Buy-Out InsuranceDisability buy-out insurance provides benefits for all parties.
- The disabled owner is guaranteed a buyer willing to pay a reasonable price for their share of the business. Because a formula is already put in place to determine a reasonable price, it also negates the need for litigation or for negotiation on the price. Furthermore, it enables the individual to concentrate on recovering from illness or injury without the added concerns of running the business or finding a suitable buyer.
- The remaining owners are enabled to purchase the shares in their business without having to seek an outside investor. This ensures that they are able to continue in the normal operation of the company without having to relinquish any control. Continuity in daily operations is guaranteed and the remaining owners are provided with adequate funding to buy out the disabled partner.
- The business itself would normally continue to pay the disabled partner an income, or return on their investment. This financial drain can cause serious problems for the remaining partners, especially, who will need to pick up the pace to meet the increased demands. With a buy-out policy in place, this does not have to be the case because the insurance is used to cover against this liability.