Most sole business owners have never thought through who would actually run their business if they became disabled tomorrow — and a spouse or relative stepping in is rarely the answer they’d choose if given the option. Here’s a coverage built specifically for that gap.
Key takeaways
- Most sole owners haven’t decided who would run the business if they became disabled tomorrow.
- A One-Way Buy-Out lets a key employee fund a disability buy-sell agreement rather than a family member stepping in.
- The structure protects both sides: the disabled owner gets bought out, and the key employee gets the funding to do it.
Business owners are roughly eight times more likely to become disabled during their working years than to pass away — making disability, not death, the more probable trigger event to plan for.
The problem this solves
The average business owner isn’t prepared to have a spouse or relative step into the business if they become unable to work. Given the choice, most owners would rather pass responsibilities to someone who already understands the business and knows how to keep it profitable — typically a key employee, not a family member.
What a One-Way Buy-Out actually is
A disability buy-sell option called a One-Way Buy-Out gives a key employee the flexibility to purchase Disability Buy-Out (DBO) insurance, funding a buy-sell agreement between the employee and the sole owner of the business. The mechanics are similar to a life insurance policy funding a traditional buy-sell agreement, with one important difference: business owners are roughly eight times more likely to become disabled during their working years than to pass away, which makes disability, not death, the more probable trigger event to plan for.
Why this structure benefits both sides
The disabled business owner is protected because the key employee purchaser is obligated to buy out the owner’s interest. The key employee purchaser is protected because the policy provides both the opportunity and the funding to purchase the disabled owner’s interest, rather than having to come up with the money on short notice. Together, this prevents the sole owner from having to scramble to find a buyer while totally disabled, and it provides a smooth transition of ownership. Benefits are paid tax-free, though premiums are not deductible.
Contact your disability insurance specialist for more information on how to properly develop a Disability Buy-Sell Agreement between a business owner and a key employee.
Frequently asked questions
Why is a One-Way Buy-Out different from a standard buy-sell agreement?
A standard buy-sell agreement is usually funded by life insurance and triggered by death. A One-Way Buy-Out is funded by Disability Buy-Out insurance and specifically addresses disability, which for business owners is roughly eight times more likely to occur during their working years than death.
Who benefits from a One-Way Disability Buy-Out arrangement?
Both parties. The disabled owner is guaranteed a buyer for their interest in the business, and the key employee purchaser gets the funding needed to complete the purchase without having to find the money on their own.
Reviewed by Tim Fuller on 2026-09-23
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency) connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners — with the impaired-risk and complex-case expertise to place business other IMOs and BGAs turn away.
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