Disability and life insurance for women business owners
Sep 13, 2009
Jamie Fleischner

Jamie Fleischner

13 Sep, 2009

By Jamie Kantor Fleischner, CLU, ChFC, LUTCF
President, Set for Life Insurance by KF Financial, Inc.

Early in my career as a woman business owner, I didn’t consider myself any different than my male counterparts. Why did there have to be a distinction? We were all people working hard on our businesses to make a living. Why distinguish between men and women?

As the years went on and I became more involved in the industry and became a mother, I began to see the distinction and to realize there were in fact differences, especially when it came to life and disability insurance.

It is interesting to note that life insurance is purchased approximately 70% of the time by the woman, according to LIMRA. In fact, some of the most successful life insurance producers in the world are women. In some countries, the vast majority of life and disability insurance professionals are women.

What causes this discrepancy? Could it be that women are more likely to face their own mortality? Are they more likely to make plans? Are they being protective of their business and family?

As a woman businesses owner, your risk management is even more complex. You need to manage the household as well as the business.

  • What would happen to your family if you died prematurely? What would happen to your spouse or significant other? Could they survive financially without you?
  • What would happen to your business? Do you have a plan in place to pass your business on if you passed? Who would take over? Who would be legally obligated to take over your business? Do you have a plan in place?
  • What would happen if you became too sick or injured to work? How would you continue to run the household without your income? How would your business run if you weren’t there?


Ask most people to think about their most valuable asset, and they’ll mention their home, their car, their jewelry, or other possessions. But for most of us, our most valuable possession isn’t anything of those things. It’s our ability to earn a living. And just as you would insure your car, your home, and other valuable possessions, you need to insure yourself in case you are no longer able to work. That’s what disability insurance does. It provides a source of replacement income if you’re unable to work due to an illness or accident.

If becoming disabled may seem unlikely, the odds may surprise you. Roughly 3 in 10 Americans will suffer a disability lasting 3 months or longer before the age of 65. Nearly 1 in 5 Americans will be disabled for one year or more during their working years.

For many, a sudden interruption of income could have serious financial consequences. Most of us have some kind of personal debt, typically a mortgage, student loans or credit card bills. Would you be able to maintain your standard of living if you were too ill or injured to work for an extended length of time? Half of all home foreclosures in the United States result from disability as do an alarming number of personal bankruptcies. Simply put, if you have a job you likely need disability insurance.

The other thing to keep in mind is that an accident or illness that keeps you out of work for a period of time can be very costly. That’s because people who become disabled not only need to continue providing for loved ones, but for themselves as well. A disabling injury or illness could lead to medical bills, modifications to your car or home, or other unforeseen needs that can be quite expensive. For all these reasons, almost anyone who works – whether they’re single, married, with children or without – should consider disability insurance.

PREMIUMS FOR DISABILITY INSURANCE FOR WOMEN AND DISCOUNTS AVAILABLE: Premiums for women tend to be approximately 30-40% more than their male counterparts due to risk. (Women live longer and pay less for life insurance). Therefore, as a woman, it is important to look for discounts available.

  • Set for Life can offer a 10% discount for NAWBO members (National Association Women Business Owners) on policies underwritten through Guardian/Berkshire.
  • Most companies offer discounts if 3 or more people from the same employer apply for a policy. Some of these policies are unisex and discounted which can offer up to 40% off of your current and future premiums. As the business owner, if you purchase a policy and implement a policy on 2 other employees or 2 other employees purchase a policy, you may have an opportunity for steep savings.

DISABILITY BUSINESS OVERHEAD EXPENSE PROTECTION: What would happen to your business you were unable to work for an extended period of time due to an injury or illness? How would you pay rent, payroll and other expenses? Personal disability insurance protects personal income, but what protects his or her business?

The solution is a business overhead expense disability policy. It covers the ongoing operating expenses of your business and ensures that you do not have to use personal assets to pay for business expenses if you become disabled. It pays a monthly benefit to keep the business working.

The following are some business overhead expenses that are covered by BOE insurance:

  • Rent or Mortgage Payments
  • Employee Salaries and Benefits
  • Utility Bills
  • Property Taxes
  • Accounting Fees, Legal Fees, and Professional Dues
  • Malpractice and Other Business Insurance Premiums
  • Maintenance and Janitorial Services
  • Depreciation
  • Interest on Business Debts
  • Office Supplies
  • Other necessary business expenses.

Some policies even cover the salary of a temporary employee hired to do the duties of the disabled. Income taxes, the cost of inventory, and the cost of furniture are a few expenses that are not covered.

There are several key areas in which Business Overhead Insurance differs from personal disability insurance.

  • Benefit Periods – Usually, overhead expense insurance policies have short benefit periods such as 30 days. Remember that overhead expense insurance is not protecting your ability to generate income-that is what a personal disability policy does. Instead, it allows you to keep your business open, or at least pay for its expenses until you recover. In the case of a long-term disability, it offers you up to two years (depending on the benefit period you choose) to make a business decision, such as whether to shut down or liquidate your business, without worrying about accruing debt from business expenses.
  • Maximum Benefits – Personal disability insurance pays a monthly benefit as defined in the policy. Overhead expense policies allow you to purchase up to $50,000/month benefits.
  • Taxation – Overhead Expense insurance benefits are subject to income tax, but the premiums are tax deductible as a business expense. Therefore, it can become a wash.

Disability Buy-Out Insurance (DBO)

A disability buy-out insurance policy enables either the remaining owners, or the business entity itself, to buy-out the disabled owner’s share of the business at an agreeable price.

The Benefits of Disability Buy-Out Insurance

The disabled owner is guaranteed a buyer willing to pay a reasonable price for their share of the business. Because a formula is already put in place to determine a reasonable price, it also negates the need for litigation or for negotiation on the price. Furthermore, it enables the individual to concentrate on recovering from illness or injury without the added concerns of running the business or finding a suitable buyer.

The remaining owners are enabled to purchase the shares in their business without having to seek an outside investor. This ensures that they are able to continue in the normal operation of the company without having to relinquish any control. Continuity in daily operations is guaranteed and the remaining owners are provided with adequate funding to buy out the disabled partner.

The business itself would normally continue to pay the disabled partner an income, or return on their investment. This financial drain can cause serious problems for the remaining partners, especially, who will need to pick up the pace to meet the increased demands. With a buy-out policy in place, this does not have to be the case because the insurance is used to cover against this liability.

Insurance Payment Types

It is most common for a disability buy-out policy to offer a lump sum payment. This money is then used to complete a buy out in one installment. However, it is possible to arrange for the disabled partner to receive their payment in multiple installments, but this needs to be agreed when the policy is first placed in force.

Elimination Period

The majority of disability buy-out insurance policies include an elimination period consisting of between one and two years. This period helps to limit the impact of the disability on the business, and it also allows the disabled owner time to determine whether or not they will be able to consume normal duties or whether a buy-out is the best solution for all concerned.

For more information about disability and life insurance for women business owners, please visit www.setforlifeinsuarance.com or call us toll free at 888-553-3559.

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