What Does Disability of Partner Buy and Sell Insurance Mean?
Also called Disability Buy-Sell Insurance, this is a policy that provides money for a company in a future business scenario where a partner/owner suffers a long-term illness or a disability and the other partner/owner might want to buy the disabled partner's shares. If such a scenario occurs, the insurance company gives an amount to the business partner who needs it to buy out the shares of the one suffering from a disability or a crippling disease.
Insuranceopedia Explains Disability of Partner Buy and Sell Insurance
It is more likely that a business partner will suffer from disability than die before his or her retirement. If this happens, this becomes a problem to the other partner. The business will still provide income to the one who is disabled even if the latter can no longer do his or her share of the work because of his or her condition. That is where buy and sell insurance for disability helps. With a policy like this, an insurance company provides money for the healthy partner to buy the shares of the one who is disabled instead of taking a bank loan for the buy-out, which will just place the business in debt. It is a win-win situation for both the one afflicted with the disability and the healthy partner. The first gets the money equal to his shares. The second proceeds with making new business decisions without experiencing financial stress.