Part of our guide: Disability Income Insurance: Solutions, Tools and Guides →
The CEO’s share value had grown 250% since the buy-sell agreement was last updated — and the board realized their disability buy-out coverage hadn’t kept pace. Here’s how we closed a $33 million gap before it became a problem.
Key takeaways
- Buy-sell agreements can quietly fall out of date as a company’s value grows, leaving disability coverage underfunded.
- A disability buy-out policy pays a lump sum matched to the buy-sell agreement’s trigger language if a key owner becomes disabled.
- Reviewing buy-sell coverage against current valuation — not the valuation at signing — is what catches gaps like this one.
The CEO’s share value grew 250% since the buy-sell agreement was last funded — and the board closed the resulting $33 million disability buy-out gap for roughly $110,000 a year.
The client
A large Texas-based firm operating in grain, energy, freight, and other commodities.
The situation
The client’s buy-sell agreement had failed to keep pace with the company’s rapid growth. As the business expanded, the CEO’s share value increased by 250% since the agreement was last funded, and the insurance portfolio protecting the shareholders needed a significant increase to match. The board, made up of a dozen shareholders, determined that a disabling event affecting the CEO could cripple the company without adequate disability buy-out coverage in place, and set a target of $33 million in coverage to fulfill the buy-sell obligation.
The solution
We placed a disability buy-out policy funded to a $33 million limit, structured to pay a lump sum benefit if the CEO became disabled, under the definitions and trigger language of the disability repurchase clause in the buy-sell agreement. The annual premium came in at roughly $110,000 plus taxes and fees — a fraction of the exposure it protected against.
The result
The board now has a buy-sell agreement backed by coverage that actually matches the current value of the business, closing a gap that had been quietly widening as the company grew. If the CEO were to become disabled, the company and remaining shareholders have the funding in place to execute the buyout without a forced sale or a cash crunch.
Four questions worth asking every business-owner client
For productive succession-planning conversations, we suggest asking clients or prospects: Do you know the current value of your business? Do you have a buy-sell agreement in place? Has that agreement been revisited since any change in company value, or since partners were added or removed? And without a buy-sell agreement, are you aware you could end up in business with a partner’s spouse if that partner dies or becomes disabled?
If you have a client whose buy-sell agreement hasn’t been revisited since their business changed in value, that’s a case we can help you review and place.
Frequently asked questions
What is disability buy-out insurance?
It’s a policy that pays a lump sum, or sometimes installments, to fund the purchase of a disabled owner’s share of a business under a buy-sell agreement, so the remaining owners can complete the buyout without a forced sale or cash shortfall.
How often should a buy-sell agreement’s funding be reviewed?
Whenever the business’s value changes meaningfully, or when partners are added or removed. In this case, the CEO’s share value had grown 250% since the agreement was last funded, leaving a significant gap that only came to light when the board reviewed it.
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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