What type of insurance is designed to provide funds for a business to purchase the interest of a disabled partner?

Disability buy-sell insurance is specifically structured to address the situation where one partner in a business becomes disabled and can no longer fulfill their role. This type of insurance provides the necessary funds for the remaining partners or the business entity to buy out the disabled partner's interest, ensuring that the business can continue operating smoothly without disruption caused by the absence of one of its partners.

In the context of a partnership, this type of insurance is critical for maintaining business stability and continuity. It also helps prevent potential disputes among partners regarding ownership and control of the business during the period of disability. The funds from the disability buy-sell policy are typically paid directly to the business or the remaining partners when the disability trigger occurs, making it a practical solution for protecting business interests.

Key person insurance, while important for a business, covers the loss of a key individual whose absence would significantly affect the company, but it does not specifically facilitate the buy-out of interest from a disabled partner. Business overhead expense insurance focuses on covering the operating expenses of a business during the owner's disability but does not deal with ownership issues. Group disability insurance provides income replacement for a group of employees but is not tailored for the buy-sell aspect in a partnership context.