The benefits received by a business in a disability buy-sell policy are:

In a disability buy-sell policy, the benefits received by a business are classified as income tax-free. This is a significant advantage for business owners as it allows them to receive funds to buy out a disabled partner or owner without incurring a tax liability on those benefits.

When a business receives proceeds from a disability buy-sell policy, these funds are not considered taxable income. This tax-free status is designed to facilitate the smooth transition of ownership in the event of a partner's disability, ensuring that the remaining partners can buy out the disabled partner's stake without the burden of additional taxes that would otherwise diminish the financial resources available for the buyout.

This provision encourages business continuity by allowing businesses to have the necessary financial means to address such unforeseen circumstances, ultimately aiding in the stability and viability of the company during challenging times. It is important for business owners to understand this benefit as they structure their buy-sell agreements and plan for potential disabilities among partners.