Business Owners
Disability Insurance
As a business owner, you know the value of forecasting and strategic planning. Understanding your options when it comes to adequate insurance coverage is a critical part of protecting what you have built. Disability insurance for small business owners is particularly important.
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- Buy/Sell Agreements
- Company Revenue Protection
Personal Income Protection
If you have 10 or more employees, you may consider a group policy. Group policies typically offer a limited monthly benefit (60 percent of an employee’s income to a maximum amount). If you as the employer are paying the premiums, the benefits to the employee are taxable. Read more about the difference between group and individual policies by here.
When an individual is invited to become a partner in a business or a professional practice, they typically give up a percentage of income in exchange for an equity position. There is often a period between the agreement and full buy-in. If the person buying into the practice becomes disabled during the buying in period, problems can develop in the completion of the buy in agreement. The new, to-be partner, is not yet a partner. Therefore, a traditional buy-sell plan will not work in covering this risk. A specialty plan known as Buy In Disability Insurance can fulfill the financial obligations stated in the contract, thereby safeguarding the completion of partnership.
A disability buy out (DBO) 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 determined prior to the disability. Benefits include a set price (eliminating the need for litigation at the time of parting), continuation of normal operations, and peace of mind for the remaining partners.
It is most common for a DBO 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. Learn more about DBO insurance here.
What would happen to your ability to save for retirement if you were hurt or too sick to work? Most people in this situation, with no income and increased medical bills, are forced to use their savings to meet everyday living expenses. It’s important to put a fallback plan in place to ensure that money continues to be put away for your retirement even if you become disabled.
Retirement Protection Disability Insurance helps you continue saving for retirement in the event of a disability. If you become disabled, the policy pays a benefit in the amount of your retirement plans monthly contribution into a special trust. The money in the trust is invested at your discretion until you reach age 65 and then distributed to help supplement your retirement income. It is not a pension plan. Rather, it is a program that provides disability income insurance to ensure your ability to make retirement plan contributions until the age of 65. The goal: to provide you with close to what you could have expected from the retirement plan if you had not become disabled. Learn more about Retirement Protection Insurance here.
An interesting problem develops when termination of an employee involves a severance package and part of that package is the requirement to continue certain employee benefits such as their Long Term Disability Insurance. The human resource departments often get these calls and panic when they realize they cannot perform as promised since they can no longer keep the terminated employee on the group LTD plan. Securing an individual plan is not an available option since the person is currently unemployed. The solution is a severance disability policy to help cover this risk. Learn more about Severance Disability Insurance here.
Starting a business can be an arduous process. One of the most important steps is to secure financing. To ensure you can still pay your payments if you become disabled, some banks require a disability insurance policy to secure the loan. There are policies designed specifically for this need, which is separate from business overhead expense insurance that would pay the overhead expenses to keep the practice running. For more information and to request a quote comparison, please contact Set for Life Insurance today!
In many cases, the most valuable asset a business has is one or more “key employees”. While the employee may be covered by individual disability insurance and even worker’s compensation, if they were to suffer a disabling illness or injury, the business itself stands to lose significant earnings through that loss. Key person disability insurance is designed to insure against this potential loss, for the sake of the business. Learn more about how to determine the financial value of an individual, payment terms and what types of coverage are available here.
This is also known as Business Overhead Expense (BOE) or Professional Overhead Expense (POE). As a business owner, you are responsible for paying expenses to keep the business running. If you became too sick or injured to work, consider how you would be able to continue to pay rent, payroll, and all other overhead expenses.
This product is often used by small companies or professionals who need to be healthy to cover the monthly costs of doing business. BOE or POE insurance covers the ongoing operating expenses by paying monthly benefit to keep the business afloat while the business owner or disabled professional recovers. Learn more about what expenses are covered and how this product differs from personal disability insurance here.