Disability Buy-Out Plans


What would you and your partners do if one of you became disabled?

Since no one can predict when – or whether – the disabled partner will return to work, it’s almost impossible to initiate a simple buy-out, the obvious solution when a partner retires or dies. And, if the disabled partner is not eligible to begin collecting retirement funds, he or she will need an income. To further complicate the issue, he or she may want to recover the capital invested in the business and recover lost income.

There’s a workable solution to help prevent conflicts and balance everyone’s best interests: a disability buy-out plan.

It’s designed specifically to provide the company’s owners with the money they would need to reimburse a disabled owner for his or her financial interest in the company, which allows the business to stay healthy while everyone is treated fairly:

  1. The disabled partner recovers her capital investment through the buy-out and continues to receive an income – without bankrupting the business – through the benefits from her individual disability insurance policy.
  2. The healthy partner is able to keep control of the business by buying out the disabled partner at a specified time for an agreed-upon price using funds supplied by the insurance carrier, not the business.
  3. Last, the business can continue to prosper and grow, without getting bogged down in costly legal disputes or hurtful wrangling over the cost of a buy-out.

It just makes sense to make sure your business stays healthy, even if one of you is not.