Disability Buy-Out Insurance
Disability Buy-Out (DBO) insurance helps fund the purchase of a totally disabled business owner’s interest under a buy-sell agreement. It allows remaining owners to continue the business without:
- Using business cash flow
- Obtaining loans from financial institutions
- Selling shares of the business to get working capital
The policy is conditionally renewable to age 65 with guaranteed premiums.
The HH 703 policy is approved in all states except California.
- Smaller businesses with 2 to 10 owners1
- Occupations classified as 3A and above
- Businesses not owned by spouses, parents and children or owners with large age differences
- Up to $20 million business value considered ($10 million and above, contact an underwriter)
1 2 to 8 owners for 2A and 3A/3A-M occupation classes.
- Issue ages: 18 to 60
- Occupation classes: A to 5A/5A-M
- Must own a minimum of 5% of the business; all eligible owners must apply in the same proportion as their ownership
- Minimum years in business: 1 year for service professionals and 3 years for other business owners
- Number of owners:
- 2 to 10 owners: 4A and 5A/5A-M
- 2 to 8 owners: 2A and 3A/3A-M
- 2 to 6 owners: A
- Valuation: If the business is valued at more than $10 million, contact your underwriter. Businesses valued at more than $20 million are typically not eligible for coverage.
- Elimination Periods: 365, 540 or 730 days
- Benefit payout: lump sum, monthly installments of 24, 36 or 60 months or a combination
- Benefit maximum: Up to $3 million (additional guidelines apply)
- Riders: Benefit Update
- Discounts: 10% Select Occupation, 20% Multi-Life1, 10% Association (not available in all states)
- Simplified underwriting available for aggregate benefit amounts up to $360,000.
See additional underwriting guidelines (PDF) (JJ1213DBO).
1 Available when three or more employees with a common employer purchase Individual Disability Insurance from the same employer. Not available on business products in Ohio.
Key materials listed below.
Business continuation approach flier (DI9191)
Send to owners to spark interest in Disability Buy-Out insurance.
Pitfalls of Disability Buy-Sell Agreements (JJ1769)
This employer piece asks several questions about how they can make their business continuation plan stronger (buy-sell agreement funded with insurance).
KPR and DBO working together for business continuation needs (JJ1844)
This piece is directed to business owners. It shows how KPR and DBO can work together to ease the transition after an owner becomes disabled.
Disability Buy-Out policy highlights (Customizable) (JJ2165C)
This is a client benefits overview of our Disability-Buy Out product. Can choose from HH794, 703, One-Way Buy-out or California contracts.
This content is designed for use by financial professionals. Consumers may learn more about products and services on www.principal.com.