If you are a small business owner, chances are you already carry a lot of insurance. However, one of the most important yet overlooked type of insurance is disability insurance.
Disability insurance is designed to replace your income if you become too sick or injured to work. Sound improbable? Think again. According to the Council of Disability Insurance Awareness, a 20 year old has a 1 in 4 chance of becoming disabled during their working career. http://www.disabilitycanhappen.org/chances_disability/.
As a business owner, here are some considerations when it comes to disability insurance:
1) If you are just starting your business, you may need to wait until you have established at least one year of income history. Companies will determine the amount of eligible benefit based on this history and will require a tax return for income verification. If you don’t yet have this established, you may need to wait.
2) Business owners’ income may fluctuate from year to year. If this is the case, the company will request several years of tax returns for verification and will base eligibility on the pattern.
3) Business owners need to consider covering both their personal and business income. An individual disability policy is intended to cover personal income or take home pay. Make sure you pay these premiums with after tax dollars so the benefits at the time of claim are tax free.
4) A business overhead disability policy covers overhead expenses such as rent and payroll. This helps you keep the lights on if you are out of commission. These policies can be paid for with business dollars since the benefits are paying business expenses.
5) Premiums for business owner disability insurance can vary widely as the occupational class is dependent on your job duties. For instance, the premiums for an attorney or a CPA will be significantly less than for a restaurant owner/chef based on risk.
6) Premiums for women are more expensive by approximately 40%. If you are a woman business owner, we may be able to establish discounts for you by adding policies on key employees. Most companies will allow you to establish unisex rates if 3 or more policies from the same business are purchased.
If you are a business owner with a business partner, you may want to consider putting together a buy sell agreement. This allows business owner to buy each other out in the event of death or disability. It is important to not only put together the documents, but to also make sure they are funded properly with life and disability insurance.
For more information about business owner disability insurance or to request a quote comparison, contact Set for Life Insurance today!
