Once you enter into a Disability Buy-Out Contract with Northwestern Mutual, the contract cannot be changed unilaterally by the Company. The policy can be renewed on each policy anniversary up to age 65 provided the Insured is working full-time in the business and the Insured owns some, but not more than 90%, of the business and benefits to reimburse buy-out expenses have not been paid under the policy.

This is the date on which benefits become payable after the Insured becomes totally disabled. Northwestern Mutual offers Beginning Dates of 366 days or 731 days. The Insured does not have to be continuously disabled to qualify for the Beginning Date.

The Insured is totally disabled when unable to perform the principal duties of the regular occupation and not working in any capacity in the business.

Coverage is provided for the Insured's occupation in the business at the time the Insured becomes disabled. If the Insured is regularly engaged in more than one occupation in the business, all of the occupations of the Insured in the business at the time the disability starts will be combined to be the regular occupation. Other occupations the Insured may have outside the business, if any, do not apply.

The contract provides a benefit to reimburse buy-out expense. Buy-out expense is the amount that has actually been paid to the Insured to purchase the Insured's ownership interest in the business, provided the amount is paid under the terms of a written buy-out agreement in effect on the Beginning Date and the amount has been determined using a generally recognized valuation method.

There are two types of buy-out agreements supported by Disability Buy-Out insurance, an Entity Purchase Plan and a Cross Purchase Plan. Both plans can be used for either a partnership or a corporation. And in both cases, all parties involved must agree to all the terms of the plan including how benefits will be paid upon disability of the Insured.

 Under all disability buy-out plans (Entity Purchase or Cross Purchase) premiums paid are not tax-deductible, but any benefits received are income-tax-free [IRC Sec. 104(a)(3)]. Any taxable gain realized upon the sale of the business interest of the disabled business owner will be taxable to the business owner. You should consult your tax counsel regarding deductibility of premiums and tax treatment of benefits. 

If the buy-out agreement provides that the purchase of the Insured's ownership interest shall continue even though the Insured, after the Beginning Date, dies or recovers from total disability, the Benefit will be payable as though the Insured had continued to be totally disabled.

Premiums are waived which become due on the policy while the Insured is totally disabled if the total disability lasts for at least 90 consecutive days. If premiums are waived, the Company will refund that portion of a premium paid which applies to a period of total disability beyond the policy month in which the total disability began. If premiums are waived on a policy anniversary, an annual premium will be waived.

The Owner may change the Insured under the policy by paying the required costs and meeting any other conditions.

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