Let’s say you and a friend decide to start a business. It’s not easy, but through hard work and dedication, you’re able to make it a success. Everything is great – until everything goes wrong. A serious health condition leaves your friend and business partner unable to work. Now you’re struggling to keep the business going on your own. Meanwhile, your business partner and friend still needs an income. The best solution would be for you to put together the funds to buy out your friend’s interest in the business, but you don’t have the money to do this.
Although you might not face this scenario yourself, some of your business owner clients might. Many small businesses operate as a partnership. These businesses depend on the continued efforts of both partners. If something happens to one of those partners, the business could collapse.
Thankfully, there’s an insurance solution: buy-sell disability insurance.
How Buy-Sell Disability Insurance Works
Buy-sell disability insurance provides a payout to be used to purchase the business interest of an owner who becomes disabled. The payout may be a lump sum, or it may be a series of payments made over a limited period of time.
This is a special type of disability insurance designed for scenarios involving long-term disability. In fact, the elimination period is typically 12 months, and the payout will only occur if the business owner is considered totally and permanently disabled.
This means that business owners will still need other types of insurance, including key person disability insurance and business overhead expense insurance. These other coverage types can help keep a business going during difficult times. If it looks like the situation isn’t temporary, however, buy-sell disability insurance facilitates a long-term solution.
Do Your Clients Need Buy-Sell Disability Insurance?
If your clients include small business owners, there’s a good chance they could benefit from the protection provided by buy-sell disability insurance. This is true even if they have other disability insurance products for business owners.
When you talk to your clients, ask them the following questions:
- Do they share ownership of their business with a business partner?
- If their business partner became disabled and unable to work, how would the business be impacted?
- Could the company afford to continue to pay a business partner who was unable to work due to disability?
- If they needed to buy out the business partner’s interest because of a disability, would they be able to put together the necessary funds without it being a hardship?
Want to learn more about buy-sell disability insurance? Download our new Buy-Sell Product Sheet.