No entrepreneur wants to have to buy out a disabled partner. Disability buy-sell insurance can save a small business from the brink.
This coverage should be at the top of businesses’ insurance priority list. Depending on the option chosen by the insured, the buy-sell product may pay out a lump sum, a monthly benefit or a combination of both.
The coverage thus protects the company's long-term future. Shareholders can buy back shares without having to encumber the company's assets or dip into their personal assets.
Only two products offered
However, the market for buy-sell insurance is not particularly diverse. Since Manulife's withdrawal in 2022, only two insurers offer this product: Canada Life, with its Disability buy-sell insurance, and RBC Insurance, with its Disability Buy Sell policy.
As can be seen from the comparison chart prepared by InsuranceINTEL for the Insurance Portal, the two products are very similar. For example, they both offer coverage for people between the ages of 18 and 60. Both insurers offer a maximum issue limit of two million dollars.
One of the differences between their products is the minimum issue amount the insured can purchase. Canada Life has set the threshold at $50,000 as a lump sum, or $833 per month for 60 months. RBC Insurance offers a choice between a monthly lump-sum installment of $45,000 or a flexible lump-sum payment of $25,000.
Non-cancellable
Both products are non-cancellable. This means that the insurer cannot cancel the contract with the insured. Nor can it increase the premium payable by the policyholder. This is a rare quality in the market. Only Canada Life and RBC Insurance offer non-cancellable disability insurance, including in the other categories, i.e. products for workers and professionals, and a product for entrepreneurs to cover their business overhead.
Target market
Further research on InsuranceINTEL reveals the niches served by both insurers’ buy and sell insurance products. Canada Life’s buy-sell plan is ideally suited for owners of privately held businesses. RBC Insurance, on the other hand, is designed for partnerships and professional corporations comprised of two to five principals. However, RBC Insurance will consider applications from organizations with more than five principals. The ideal target market for the product are partnerships and closely held corporations that employ less than 50 people, have up to $10 million in annual sales and are in stable industries.
Tariff pressure
In last year's article on disability buy and sell insurance, the Insurance Portal reported that small and medium-sized enterprises (SMEs) were under pressure. Companies which had used the federal Canadian Emergency Business Account (CEBA) program to get through the COVID-19 pandemic, were obliged to start reimbursing the Government of Canada.
This year, the tariff war launched by the U.S. President is once again shaking business confidence. In this environment, buy-sell insurance can contribute to the financial protection of Canadian businesses.
According to a survey conducted from Feb. 6 to 11, 2025 by the Canadian Federation of Independent Business (CFIB), nearly 18% of SMEs are facing order cancellations or pauses. CFIB reports that this figure rises to 34% among exporters.
CFIB data also reveals that 54% of SME owners feel unprepared for the potential impacts of U.S. and Canadian tariffs. One in five SME owners is considering reducing workforce/hours, and 24% plan to delay expansion plans.
