Buy Sell Insurance
 
A Disability Buy Sell policy allows for the systematic, orderly and equitable transfer of ownership shares from a disabled partner to the partner or partners who remain. The partnership is provided with the funds for the unexpected purchase, potentially saving the entity from serious financial distress, and allows the company to continue without introduction of new individuals to the core leadership team.
 

Disability Buy Sell Insurance

 
 

Intent:

 

Most Partnerships have Buy Sell Agreements in place, whereby a partner's share of the business may be purchased by the other partner(s) in the event of a particular life event. Most frequently we see agreements in place which deal with the death of one partner, funded by life insurance. If a partner should suffer a permanent disability, the need exists for the buy out of the unproductive partner, which can be funded by a Disability Buy Sell policy.

 

 

A policy may provide:

 

  • Funds which are paid out in accordance with the wording of the partnership's buy sell agreement
  • A stated policy benefit amount based on the current valuation of the firm

 

 

Policy characteristics:

 

  • Waiting Periods typically begin at 365 days, 730 days not uncommon
  • Benefit payout methods of Lump Sum, Monthly Installment or a combination of the two
  • Disabled partner is generally considered to be unable to perform any duties of his occupation and no further services for the firm
  • Benefit amounts can as high as $3 million with domestic carriers, substantially higher with Lloyds of London syndicates

 

 
 
 
 
 
 

Many Buy Sell agreements in force today make mention of the buy out of a disabled partner, but provide no insurance funding method for said buy out.



 
Without insurance, the other partner(s) would be required to produce the necessary funds needed for the disabled partner's buy out from their personal or entity's funds.