Disability Buy-Sell

Disability Buy-Sell in Cedar Rapids IA, Iowa City IA, and across the state and country.

If you buy disability insurance, then you are enabling yourself to receive a supplementary income in the event that you sustain a substantial injury and cannot work.  

However, at times, a disability might be so pronounced that you must eventually sell your share of the business and leave the company entirely. As one of the owners of the company, you will want to receive fair compensation for this sale. If you have a disability insurance policy in conjunction with a buy-sell agreement, then you will have a guarantee that you will receive this payout. 

For help getting this benefit, contact Brokerage Solutions, Inc. We can help you understand the nuances of a buy-sell agreement disability policy and guide you in choosing one that is best for you. 

Call us at (319) 393-9410 for more information or request your free policy quote now! 

Common Buy-Sell Disability Insurance Questions 

What is buy-sell insurance? 

On its face, disability insurance provides a straightforward benefit. If the policyholder sustains a disabling injury, then they might not be able to work, earn a living and continue to live comfortably. Their plan will provide them with a portion of their missing income and other benefits for as long as they remain disabled. 

Buy-sell disability insurance takes this guarantee of income assistance a step further. 

When one of the company’s owners becomes disabled, then they might not only need income assistance, but they might also eventually want to sell their share of the business. A buy-sell disability policy provides them the financial incentives they need while allowing their company to buy them out. Therefore, both parties benefit from the coverage offered by this plan.  

How does a buy-sell agreement work? 

A buy-sell agreement is the legal framework through which you and your company agree that you will sell them your shares of the company when you are ready, and they will in turn compensate you.  

This day might come at the time that you sustain a disability which essentially forces you into retirement. However, your business might not be financially prepared to make this sale to you. A buy-sell disability insurance policy will ensure that you receive compensation from your company when you are ready to make the sale. 

This guarantees there will be a buy-out, the timeframe in which it will happen, and a formula for determining the value of your percentage of ownership. 

How does buy-sell insurance work? 

There are three primary types of buy-sell disability plans: 

• Entity Purchase Plans: The company itself purchases these policies on behalf of the covered employees & owners. In turn, the company will own and pay for the plan, and receive the financial benefit from the plan upon payout. They will then pay the seller using this fund.

• Cross Purchase Plans: A cross purchase plan allows one business owner to buy a disability plan on another, who in turn buys coverage on their partner. Each person is the policyholder, owner and beneficiary. Therefore, should your partner become disabled, you can file a claim against the policy you hold on them in order to buy their share of the company.

• Hybrid Plans:These benefits allow you to combine features of both entity and cross purchase plans, in a wait-and-see setup.

Additionally, within your buy-sell agreement, you can include stipulations for several additional types of disability insurance. These can include both disability income coverage and business expenses disability coverage. Business expenses disability coverage ensures that if you are a sole proprietor and sustain a disability, that you will be able to pay normal operating expenses that ensures the business doesn’t fail before you can sell it.