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Disability Buy Out 

A disability buy-out policy differs from a life insurance policy designed to fund a buy-out in the event one owner dies, although a life insurance policy may be constructed to provide for disability benefits. A disability buy-out insurance plan is specifically designed to pay an amount equal to the pre-arranged buy-out amount agreed to by the owners of the entity. Generally, the provisions provide for a lump-sum payment, thereby facilitating the buy-out; however, if the owners desire, the plan can permit the buy-out to occur through the use of periodic income payments.

Disability buy-out insurance will avoid financial and emotional strain and provide benefits for all parties involved. The disabled owner is guaranteed a buyer willing to pay a reasonable price for his/her share of the business without having to negotiate during a period of disability. The remaining owners are provided with adequate funding to purchase the shares in their business without having to seek an outside investor, ensuring that they are able to continue the normal operation of the company without having to relinquish any control.

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