Facts That May Surprise You
Partnership Risk
A firm established by two 35-year old co-owners faces a 75% probability that at least one owner will sustain a long term disability prior to age 65.
Allan B. Checkoway; Insuring the Disability Hazard in the Small Closely Held Corporation; Journal of the American Society of CLU & ChFC; January 1985, based on 1964 Commissioner's Disability Table
Large equity positions can make it difficult to cash out a Principal in the event of death or disability due to the sheer size of the transaction.
A long, drawn-out process is not in anyone's best interests as delays only introduce unnecessary economic risk, legal risk, and complexity.
Life insurance covers the death risk. But disability is 2-3 times more probable than premature death, and should not be overlooked.
Specialized disability insurance products designed for business buy-sell funding have several features that ordinary disability income and group LTD plans lack. Crucially, buy-sell products involve an lump sum payout up front, avoiding the mess that would follow if the disabled business owner recovers after the buy-sell has been triggered.