--- title: "Texas Physicians: Must-Knows for Funding Your Buy-Sell Agreement" description: When a business partner can no longer work, it’s usually best if the co-owners agree to buy him out. The right kind of disability insurance is essential. image: https://www.tmait.org/hubfs/TMAIT_BLOG_buy_sell.jpg --- - [800-880-8181](tel:800-880-8181) - [CONTACT US](https://www.tmait.org/contact) - [SELF-SERVICE PORTAL](https://tmait.aebsys.com/#/) [![](https://www.tmait.org/hs-fs/hubfs/TMA%20Insurance%20March%202019/Image/logo.png?width=197&name=logo.png)](https://www.tmait.org/) Topics All Accident Insurance Accidental Death and Dismemberment Auto & Home Insurance Auto Insurance Business of Medicine Business Overhead Expense Insurance Comparing Insurance Providers COVID-19 FAQs Critical Illness Insurance Dental Insurance Disability Insurance Employed Physicians Family Featured Financial Advice Group Benefits Group Coverage Health Insurance Homeowners Insurance HSA Independent Contractor Independent Physician Individual Coverage Insurance For Good Insurance for Women Insurance Review Key Person Insurance Life Events Life Insurance Locum Tenens Medevac Insurance Medical Insurance Medical Practice Medicare Medicare Part D Medicare Supplement Medigap Nearing Retirement Office Overhead Expense Insurance Open Enrollment Personal Umbrella Insurance Pet Insurance Practice Management Practice Managers Practice Owners Prescription Drug Coverage Renters Insurance Residents Retired Physicians Retirement Short Term Disability Short-Term Medical Insurance Supplemental Hospital Indemnity Insurance Term Life Insurance Travel Insurance Vision Insurance Women Physicians Young Physicans Young Physicians ![](https://www.tmait.org/hubfs/TMAIT_BLOG_buy_sell.jpg) [Medical Practice](https://www.tmait.org/blog/topic/medical-practice) # Texas Physicians: Must-Knows for Funding Your Buy-Sell Agreement 18 January 2016 A stake in a business partnership is an amazing asset, but one that comes with responsibilities. What if you or a partner suddenly can’t work due to a disability? It usually makes sense for all parties to have an insurance-funded buy-sell agreement. If there is not a buy-sell agreement in place funded by an insurance policy and the partners can’t afford to purchase the equity then you’ll likely have to look for buyers on the open market.Will you end up getting what your portion of the business is worth? Making sure the funds required to perform such a buyout are available takes planning. ## The Benefits of a Buy-Sell Agreement The odds of a death or disability occurring in a long-term partnership are surprisingly high. [One in four twenty-year-olds will become disabled before they retire](http://www.limra.com/uploadedFiles/limra.com/LIMRA_Root/Posts/PR/_Media/PDFs/2015%20DIAM%20FINAL.pdf). **RELATED: **[**The Powerful Facts About Disability [Infographic]**](https://blog.tmait.org/the-powerful-facts-about-disability-infographic) Partners plan for this scenario by entering into *buy-sell agreements;* that if a co-owner is unable to continue the others will purchase the remaining part of the business. The [benefits of a buy-sell agreement](http://www.forbes.com/sites/robertwood/2011/02/07/in-business-get-a-buy-sell-agreement/) include: - Guaranteeing that the fair cash value of a disabled partner’s interest can be raised. - Keeping control of the business in the hands of remaining partners, not ceding it to third parties. - Allowing the interests of the remaining partners and family of the disabled partner to remain separate. ## Ways of Funding Your Practice’s Buy-Sell Agreement Funding the buy-sell involves pondering scenarios in which owners might find themselves unable to continue and taking out the following policies to cover those situations: - **Life insurance** to cover death. - **Long-term disability **for an illness or injury. [Buy-sell purchase agreements are typically funded](http://www.investopedia.com/exam-guide/cfp/taxation-business-use-of-insurance/cfp5.asp) in one of two ways: - **Entity Purchase:** The partnership takes out a policy on each co-owner, pays the premiums, and receives the benefit, which is then paid to the departing owner. - **Cross Purchase:** Every partner takes out a policy each of the others, pays the premiums out of his own pocket, and personally receives the benefit, which is then paid to the departing owner. ## Disability Considerations for Buy-Sell Agreements Pairing disability insurance with your buy-sell agreement provides the funds to allow your company to buy her share of the business. The disability policy is separate from the buy-sell agreement. Although the insurance company is responsible for making payments to policy beneficiaries in both entity and cross purchases, payments are not made directly to the disabled party. **RELATED: **[**5 Benefits of Group Long-Term Disability Insurance for Small Medical Practices**](https://blog.tmait.org/5-benefits-of-group-long-term-disability-insurance-for-small-medical-practices) Certain provisions of the disability insurance policy should match those of the buy-sell agreement. This includes the definition of “total disability” as well as the length of the *elimination period*, the length of time a disability must last before the co-owner is eligible to receive benefits. If you found this article helpful, may we suggest: - For more on **protecting against disability**, read [**The Importance of Choosing the Right Disability Insurance Company**](https://blog.tmait.org/the-importance-of-choosing-the-right-disability-insurance-company). - For more on **practicing medicine in Texas**, read [**Texas Ranks in Top 5 Best States for Physicians to Practice**](https://blog.tmait.org/texas-ranks-in-top-5-best-states-for-physicians-to-practice). - **For more on **defending your practice against unexpected events**, read [**Protect Your Practice With Business Overhead Expense Insurance**](https://blog.tmait.org/protect-your-practice-with-business-overhead-expense-insurance).** ** [ Medical Practice ](https://www.tmait.org/blog/topic/medical-practice) ** [Featured](https://www.tmait.org/blog/topic/featured) [**Previous Entries](https://www.tmait.org/blog/why-medical-evacuation-insurance-is-critical-for-physicians) [Next Entries**](https://www.tmait.org/blog/young-physicians-shouldnt-leave-their-careers-to-chance) ## Recommended Posts ### [A New Alternative for Group Health Insurance](https://www.tmait.org/blog/a-new-alternative-for-group-health-insurance-group-benefits) ### [Why Going It Alone on Group Health Coverage Costs Your Practice](https://www.tmait.org/blog/why-going-it-alone-on-group-health-coverage-costs-your-practice-group-benefits) ### [Disability Insurance—Without Gender-Based Pricing Discrimination](https://www.tmait.org/blog/disability-insurance-without-gender-based-pricing-discrimination) ### [How TMA Insurance Trust Reinvests in You](https://www.tmait.org/blog/how-tma-insurance-trust-reinvests-in-you) ### [Practice Owners Share Their Experience Navigating PPO Health Insurance Options](https://www.tmait.org/blog/practice-owners-share-their-experience-navigating-ppo-health-insurance-options-group-benefits) ### [Insurance For Good](https://www.tmait.org/blog/insurance-for-good) ### [When a High-Deductible Health Plan Meets Critical Illness](https://www.tmait.org/blog/when-a-high-deductible-health-plan-meets-critical-illness) ### [Final Opportunity to Check If a Group PPO Plan Is Possible for 2026](https://www.tmait.org/blog/final-opportunity-to-check-if-a-group-ppo-plan-is-possible-for-2026-open-enrollment) ### [Strategies for Success in Locum Tenens and Contracting Careers](https://www.tmait.org/blog/strategies-for-success-in-locum-tenens-and-contracting-careers) ### [TMA Member Critical Illness Insurance Guarantees $20,000 of Coverage: Enroll by March 1st](https://www.tmait.org/blog/tma-member-critical-illness-insurance-guarantees-20000-of-coverage-enroll-by-march-1st) ### [A Guaranteed Benefit In Critical Times](https://www.tmait.org/blog/a-guaranteed-benefit-in-critical-times-critical-illness) ### [TMA Member Critical Illness Insurance: Get $20,000 of Guaranteed Coverage](https://www.tmait.org/blog/tma-member-critical-illness-insurance-get-20000-of-guaranteed-coverage) ### [Help Protect Your Income with TMA Member Short Term Disability Insurance](https://www.tmait.org/blog/help-protect-your-income-with-tma-member-short-term-disability) ### [Guaranteed Income Protection with The TMA Member Short Term Disability Insurance Plan](https://www.tmait.org/blog/guaranteed-income-protection-with-the-tma-member-short-term-disability-plan) ### [Get Guaranteed Acceptance For The New TMA Member Short Term Disability Plan](https://www.tmait.org/blog/get-guaranteed-acceptance-for-the-new-tma-member-short-term-disability-plan) ### [The Four Advantages of Buying Insurance From TMA Insurance Trust](https://www.tmait.org/blog/the-four-advantages-of-buying-insurance-from-tma-insurance-trust) ## Speak with a TMA Insurance Trust Advisor: ### Latest Post ![A New Alternative for Group Health Insurance](https://www.tmait.org/hubfs/July%202026/July%202026%20Week%201%20-%20Group%20Health.png) ### [A New Alternative for Group Health Insurance](https://www.tmait.org/blog/a-new-alternative-for-group-health-insurance-group-benefits) Jul. 04 2026 ![Why Going It Alone on Group Health Coverage Costs Your Practice](https://www.tmait.org/hubfs/June%202026/June%202026%20Week%204%20-%20Group%20Health.png) ### [Why Going It Alone on Group Health Coverage Costs Your Practice](https://www.tmait.org/blog/why-going-it-alone-on-group-health-coverage-costs-your-practice-group-benefits) Jun. 27 2026 ![Dental Insurance and the Habits It Helps Shape](https://www.tmait.org/hubfs/June%202026/June%202026%20Week%203%20-%20Dental.png) ### [Dental Insurance and the Habits It Helps Shape](https://www.tmait.org/blog/dental-insurance-and-the-habits-it-helps-shape) Jun. 20 2026 ![Unexpected Doesn't Have to Mean Unprepared This Summer](https://www.tmait.org/hubfs/June%202026/June%202026%20Week%202%20-%20Accident.png) ### [Unexpected Doesn't Have to Mean Unprepared This Summer](https://www.tmait.org/blog/unexpected-doesnt-have-to-mean-unprepared-this-summer) Jun. 13 2026 ### POPULAR TOPICS - 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