Disability Buy-Out Coverage
Whether large or small, whether organized as a corporation, a partnership, a limited liability company or a sole proprietor, you must be prepared for that day.
Having a strategy for retirement, disability and death is crucial for a smooth transition and future success … for you, your associates, your families, your employees and your business. For most of us, suffering a sudden disability is unimaginable, especially if we have always enjoyed good health.
Disability insurance reimburses the buyers of the business with tax-free benefits, and it’s instrumental in determining when an owner is totally disabled.
Assess your preparedness to protect what you and your associates have worked hard to build.
- What are your desired departure dates?
- Who will buy you and your associates out at retirement, disability and death?
- How will your business interests be transferred? Who will determine when those
interests should be transferred?
- Do you have a written buy-sell agreement?
- How is it funded and when was it reviewed last?
- Will you be able to retain your key employees?
- If you want family members to run the business, what’s being done to prepare them for management?
- Have you provided for the security and continuity of your families?
Disability Buy-Out Coverage funds a disability buy-out agreement between business owners, if a total disability gradually forces one of the owners to stop working. It is designed to reimburse the buyers of a business for the cost of purchasing the disabled Insured's interest in the business.
Once you enter into a Disability Buy-Out Contract with Northwestern Mutual, the contract cannot be changed unilaterally by the Company. The policy can be renewed on each policy anniversary up to age 65 provided the Insured is working full-time in the business and the Insured owns some, but not more than 90%, of the business and benefits to reimburse buyout expenses have not been paid under the policy.
This is the date on which benefits become payable after the Insured becomes totally disabled. Northwestern Mutual offers Beginning Dates of 366 days or 731 days. The Insured does not have to be continuously disabled to qualify for the Beginning Date.
The Insured is totally disabled when unable to perform the principal duties of the regular occupation and not working in any capacity in the business.
Disability insurance coverage is provided for the Insured's occupation in the business at the time the Insured becomes disabled. If the Insured is regularly engaged in more than one occupation in the business, all of the occupations of the Insured in the business at the time the disability starts will be combined to be the regular occupation. Other occupations the Insured may have outside the business, if any, do not apply.
The contract provides a benefit to reimburse buy-out expense. Buy-out expense is the amount that has actually been paid to the Insured to purchase the Insured's ownership interest in the business, provided the amount is paid under the terms of a written buy-out agreement in effect on the Beginning Date and the amount has been determined using a
generally recognized valuation method.
If the buy-out agreement provides that the purchase of the Insured's ownership interest shall continue even though the Insured, after the Beginning Date, dies or recovers from total disability, the Benefit will be payable as though the Insured had continued to be totally disabled.
- Waives premiums on the disability buyout insurance contract while the Insured is totally disabled if the total disability lasts for at least 90 consecutive days.
- Helps further with cash flow during a potentially difficult financial time.
The Owner may change the Insured under the policy by paying the required costs and meeting any other conditions.
Download Business Succession Brochure
The policy described here refers to policy forms RR.BUY.(0101) and RR.BUY.(0909).CA, which may not be available in all states. This information is intended to explain provisions contained in the policy; it is not the insurance contract, only the actual provisions will control. Precise contract language may vary from state to state.
Exclusions and limitations include pre-existing conditions. There will be no benefits for a disability or loss that results from an accident that occurred within two years before the Date of Issue; or results from a sickness that existed within two years before the Date of Issue; or if the accident or sickness was not disclosed or was misrepresented in the application.
A sickness is considered to have existed if symptoms were present that would have caused a prudent person to seek diagnosis, care or treatment; or if medical advice or treatment was recommended or received from a health care practitioner.
There will be no benefits for a disability or loss that is caused or contributed to by an act or incident of war, declared or undeclared, the suspension, revocation or surrender of a professional or occupational license or certificate or the commission of or attempt to commit a felony. There will be no benefits for a disability or loss for any period the Insured is incarcerated or is excluded from coverage by an Agreement of Limitation of Coverage.
For complete policy details, contact a Northwestern Mutual representative.