Disability Insurance: Buy-Out Coverage
If you were to sustain a long-term disability, the amount of additional stress in your life may compromise your ability to run your business.
If you plan in advance, you strengthen your bargaining position and allow yourself to be well compensated for your efforts over the years. As well, your company will be able to continue running smoothly.
Disability Buy-Out coverage provides the funding required to buy out an owner who is unable to continue working due to a disability. These provisions are included in the Shareholders' Agreement.
In order to prove that an insurable interest exists, it is vital to establish that the disability of the insured would result in an economic hardship for the business. For this reason, there are products available to provide the funding for a buy-out of a disabled person's interest. You can choose between a lump sum payment or monthly payments.
This is to ensure that the disabled owner has a secured source of income that does not drain resources from the company. It also eases the transition and does not risk having a lag period that would stifle business operations.
The Shareholders Agreement must be in place to claim on the policy. For more information on the Shareholders Agreement, click here.