Waypoint Insurance - Risk & Business Magazine VIIC Fall 2015 | Page 26
what buy-sell disability
insurance is meant to
facilitate.
Many companies have
ceased to exist upon
the death or disability
of one of the owners.
This is not because
the company cannot
function without
them, however. It is
simply because no
plan of succession was
put in place ahead
of time. Buy-sell
agreements are the
best way to avoid that
situation. Perhaps most
importantly, these
agreements are a way
of ensuring that the
assets of the company
or the personal funds
of the other owners do
not have to be used to
facilitate the buy-sell
agreement.
happens should one of the owners or
shareholders become unable to continue
performing their duties in the company.
that insurance to purchase the disabled
or deceased individuals interest in the
company.
In addition to buy-sell agreements, there
is often a need for an insurance policy.
This is a policy which will pay out in
the event that a buy-sell agreement
is triggered and the owners need to
purchase shares in the company. Without
this, either the company could have to
use its own assets for this purpose or
the other owners would need to utilize
personal funds. Neither of those two
situations are ideal.
Buy-sell insurance comes in two primary
forms (though there are others, should
you decide that you need them): life and
disability. The differences between them
mirror (somewhat) those of other types of
life and disability insurance. Buy-sell life
insurance would help provide the means
for a buyout in the event of the death of
one of the owners. Disability insurance,
however, is meant to handle situations
in the event of the disability of one of the
owners. In some ways, unfortunately,
a disability in one of the partners can
prove to be even more detrimental to
the company than a death would. Thi \