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Disability Buy Sell

Buy Sell coverage is designed to provide funding for the remaining owner(s) or shareholder(s) to purchase the business interest from the disabled owner or shareholder.

  • Partnerships and professional corporations comprised of two to five principals.
  • The types of businesses that would depend on a Buy Sell product for protection might be: accounting firms, advertising agencies, architectural firms, computer firms, medical practices and clinics, osteopathic practices, engineering firms, law practices, employment agencies, and small manufacturers to name a few.
  • Premiums paid are tax deductible as a business expense.
  • With the Business Insurance Option, when you financially qualify, you can increase your Buy Sell protection without requiring medical evidence of insurability.
  • Provides peace of mind - the funds will be there to buy out a severely disabled co-owner's or shareholder's ownership in the business.
Business Protector - The Buy-Sell Policy

In the event of a partners or shareholders' total disability, this policy provides funds to reimburse the owner of the policy for the buy out of the disabled individual.

There are two types of buy outs that can be funded:


1. The corporate entity purchase:

The corporation purchases the shares of the disabled shareholder, and either cancels them or holds them as treasury stock. If held as treasury stock, the shares can be repurchased by the remaining shareholder(s) later in a separate transaction.

2. The Cross purchase:

For a Partnership - The partner(s) purchase the partnership interest of the disabled partner directly.
For a Corporation - The shareholder(s) purchase the shares of the disabled shareholder directly.

The income tax implications are:

  • The premiums paid are not tax deductible by the business.

  • The proceeds, when received, are tax free to the owner of the policy.

  • For an entity purchase (Corporation) - It is our opinion that the proceeds may not be added to the capital dividend account of a private corporation. Thus a tax-free capital dividend cannot be paid.

Disability Buy Sell - Exhibit 1
Exhibit One - Cross Purchase Agreement
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