Within a Buy/Sell Agreement, there will be language that stipulates how the ownership interests of a deceased owner would handled. This would include how a decedent’s business interests would be sold to the surviving owners, with the proceeds of the sale passed on the family or estate of the deceased.

These types of business transactions can involve large sums of money that need to be liquid and on hand in order to facilitate the transaction. Life insurance policies are used to fund the transactions stipulated in most Buy/Sell agreements in the event of an owner’s death.

In the event of a disability to a business owner, Buy/Sell agreements will typically account for situations if the disabled owner is no longer able to maintain his or her role in the company.

The Buy/Sell agreement will dictate how such a situation is to be handled and how ownership is to be transferred. If that time comes, the funding mechanism to allow for the funding of the agreement, and subsequent ownership transactions, will come in the form of disability insurance, more specifically Disability Buy-Out insurance.