Disability Buy & Sell

Provides funding for business ownership transfers following a partner’s or shareholder’s disability, with tax treatment depending on the policy structure.

Business partners working together to protect business ownership

Protect Business Ownership When a Partner Becomes Disabled

Business partnerships often depend on the active involvement of each owner. When a partner becomes permanently or seriously disabled and can no longer participate in the business, the consequences can extend beyond lost income.

The disabled partner may need to sell their ownership interest, while the remaining owners may wish to maintain control of the business without placing additional pressure on its finances.

Disability Buy & Sell Insurance provides funds to help business owners purchase a disabled partner’s ownership interest under a properly structured Buy-Sell Agreement.

Why Consider Disability Buy & Sell Insurance?

Protect your business ownership, financial interests and long-term stability with a properly planned disability buyout arrangement.

Protect Business Ownership

Help remaining owners acquire a disabled partner’s shares or ownership interest.

Provide Financial Security

Allow the disabled partner to receive compensation for their ownership interest.

Maintain Business Continuity

Help the business continue operating under the remaining owners’ control.

Preserve Business Capital

Reduce the need to use business reserves or obtain additional financing to fund a buyout.

Prevent Ownership Disputes

Support a predetermined ownership transfer arrangement and help reduce potential disagreements.

Protect Business Value

Help facilitate an orderly ownership transition following a partner’s long-term disability.

How Does Disability Buy & Sell Insurance Work?

Disability Buy & Sell Insurance is generally arranged alongside a Buy-Sell Agreement, which establishes how an ownership interest will be transferred if a business owner becomes disabled.

Establish a Buy-Sell Agreement

Business owners establish an agreement outlining the conditions and terms of a disability-related buyout.

Arrange Insurance Coverage

Disability Buy & Sell Insurance is arranged to help fund the agreed purchase of the ownership interest.

Meet the Qualifying Conditions

If an insured owner becomes disabled and satisfies the policy’s qualifying conditions and waiting period, insurance benefits may become payable.

Fund the Ownership Transfer

Insurance proceeds help fund the purchase of the disabled owner’s interest, allowing the remaining owners to maintain ownership and control.

Depending on the insurance policy, benefits may be available as a lump sum, instalments or a combination of both.

Disability Buy & Sell vs Disability Income Insurance

Although both provide protection against disability, they serve different purposes.

Disability Income Insurance

Helps replace a portion of an individual’s personal income when illness or injury prevents them from working, subject to policy terms.

Disability Buy & Sell Insurance

Provides funds specifically intended to facilitate the purchase of a disabled business owner’s ownership interest under a Buy-Sell Agreement.

These two types of coverage can complement each other, protecting both an individual’s personal financial needs and the business’s ownership structure.

Who Should Consider Disability Buy & Sell Insurance?

This coverage may be particularly valuable for businesses where the disability of one owner could significantly affect operations, ownership or financial stability.

Business Partners

Owners who share responsibility for managing and operating a business.

Private Corporation Shareholders

Individuals who want to establish an orderly transfer of ownership following a disability.

Professional Partnerships

Physicians, dentists, accountants, lawyers and other professionals operating jointly owned practices.

Closely Held Businesses

Businesses where one owner’s disability could significantly affect operations or ownership.

The Importance of a Properly Structured Buy-Sell Agreement

Insurance provides the funding, but a properly structured Buy-Sell Agreement establishes the terms of the ownership transfer.

The agreement should address important matters such as the definition of disability, the valuation of ownership interests, the timing of a buyout and the responsibilities of the remaining owners.

Coordinating the insurance coverage with the agreement is essential to helping ensure that funds are available when needed and that the ownership transition can proceed as intended.

Find the Right Disability Buy & Sell Protection

InsureBizz works with leading Canadian insurance companies to help business owners evaluate Disability Buy & Sell Insurance solutions, determine appropriate coverage amounts and coordinate insurance protection with their business succession arrangements.

Contact us to explore Disability Buy & Sell Insurance solutions designed to protect your business ownership, financial interests and long-term business continuity.

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