Disability buy-out insurance
Certified Financial Planner glossary · Certified Financial Planner
Definition
Coverage funding the purchase of a permanently disabled owner’s business interest.
Disability buy-out insurance in plain English
A partner's permanent disability stalls the firm because nobody has cash to buy the interest under the buy-sell. Disability buy-out insurance funds that purchase of a permanently disabled owner's business interest, usually with a longer elimination period and a trigger tied to the agreement. It differs from business overhead expense coverage (keeps the shop running) and from personal DI (replaces salary). Align the policy trigger with the buy-sell's definition of disability.
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