What is the benefit of buy-out insurance?

Buy-out insurance, often referred to as disability buy-out insurance, is specifically designed to provide funds to business partners or co-owners in the event that one of them becomes disabled and cannot continue to actively participate in the business. The primary benefit of this type of insurance is that it allows the remaining partners to purchase the disabled owner's shares in the company, ensuring continuity of ownership and management.

This mechanism is crucial for maintaining the business's stability and avoiding disputes among partners. When a business partner becomes disabled, their shares typically need to be sold or transferred to ensure that the business can continue to operate effectively without their presence. Buy-out insurance provides the necessary capital to facilitate this transaction, thus protecting the interests of both the remaining business owners and the disabled partner’s estate.

The other choices may refer to insurance products that serve different purposes. For instance, income compensation focuses on replacing lost earnings—something different from facilitating ownership transitions. Fundraising for startups and employee health benefits are also outside the realm of what buy-out insurance specifically addresses.