Disability Buy-Sell
Disability insurance funding a buy-sell agreement, paying a lump sum or installments to buy out a totally disabled owner's business interest.
Drill all 803 terms as flip-card flashcards in the Exam Engine →
Practice This Concept
Two partners agree that if either becomes totally disabled, the active partner will buy out the disabled partner's share of the business. Which disability product is designed to fund this arrangement?
A disability buy-out (buy-sell) policy, which provides lump-sum or installment funds to purchase the disabled owner's business interest — A disability buy-out, also called a disability buy-sell policy, funds a predetermined buy-sell agreement: when an owner becomes totally disabled, the policy pays a lump sum or installments that the active owner uses to buy the disabled owner's interest. This converts the disabled owner's equity into cash and keeps the business in the hands of the active owner. The arrangement requires an existing buy-sell agreement that establishes the value and terms of the transfer, and coverage is usually limited to a percentage of the business's value. It is a distinct disability product from overhead and key-person policies.
National insurance concept
Practice all medical expense questions →