What type of contract allows remaining partners to buy out the interest of a disabled business partner?

The correct type of contract that specifically addresses the buyout of a disabled business partner's interest is known as a Disability Buy-Sell agreement. This agreement is designed to ensure that, in the event a business partner becomes disabled and is unable to participate in the business, the remaining partners have the legal and financial means to purchase that partner's ownership interest.

This arrangement typically involves funding the buyout through disability insurance, allowing the remaining partners to manage the financial implications of the partner's disability without jeopardizing the business's stability. The Disability Buy-Sell agreement provides clear terms on how the buyout will occur, including valuation of the partner's interest and the process for initiating the buyout, facilitating a smoother transition and protecting both the business and the interests of the disabled partner.

Other choices, while related to business ownership and risk management, do not specifically address the scenario of buying out a disabled partner. A Buy-Sell Agreement broadly covers various circumstances for transferring ownership among partners but doesn't specifically focus on disability. Key Person Insurance is aimed at protecting a business from the loss of a crucial employee or owner, and Buyout Policy is a more general term that doesn’t describe the specific provisions regarding disability.