Disability Buy-Out Insurance
Definition - What does Disability Buy-Out Insurance mean?
A disability buy-out insurance is insurance that the owners of a business can purchase to generate funding for a buy-out in the event that one of the owners gets a disability that results in an inability to remain an owner of the company. Therefore, if a partner becomes disabled and needs to sell their share of the company, the other partners can file a claim and get a benefit that they can use to buy-out the disabled partner.
Insuranceopedia explains Disability Buy-Out Insurance
Co-owners of a business or corporation purchase disability buy-out insurance policies because without it, they may not have the funds available to buy-out the disabled partner. For example, if a cell phone company owner has an interest in the company worth $20 million and suddenly becomes disabled and wants to sell their share, that is a very large amount of money to generate at short notice. Without disability buy-out insurance, the other co-owners might not be able to buy out the departing partner's share, and thus, a third party might be able to buy it and subsequently have a major stake in the company. However, if they have the proper coverage, they could use the benefit to purchase the $20 million share.
How Well Do You Know Your Life Insurance?
The more you know about life insurance, the better prepared you are to find the best coverage for you.
Whether you're just starting to look into life insurance coverage or you've carried a policy for years, there's always something to learn.