Gregory S. DuPont
A Tower of Strength; Insurance Against the Unthinkable
While successful business owners often spend their days meeting clients’ needs, they may have a difficult time assessing their own vulnerabilities. To cover all your bases, you may want to consider strategies that can help you meet your personal financial responsibilities and protect your business if you should sustain a disability.
When many people hear the word disability, they think of a sudden accident; however, the majority of long-term disabilities are caused by more common diseases, such as heart conditions, cancer, musculoskeletal system injuries, and arthritis. According to the Council for Disability Awareness (2014), just over 1 in 4 of today’s 20 year-olds will become disabled at some point before retirement.
A disability income insurance policy can help protect your most valuable asset: your ability to earn an income. Disability income insurance can provide a portion of your income to help meet your financial obligations. As you search for a policy, keep these provisions in mind:
- Non-cancelable policies provide guaranteed premiums and renewable coverage until you reach age 65 (subject to timely premium payment). Other policies require ongoing health exams to continue coverage.
- A policy that is conditionally renewable is renewable beyond age 65, provided you continue to work full time.
- As a business owner, you have years of experience, education, and training. Therefore, it may be important to seek out a policy that offers “own occupation” or “specialty within your own occupation” coverage. Without these stipulations, if a disability occurs, you may be unable to collect benefits if you are still able to work as a store clerk, janitor, or any other occupation regardless of your training.
- Carefully consider any riders offered with your policy. Riders can provide coverage for partial disability, cost of living adjustments (COLA), and future increases in salary. Riders are typically offered at an additional cost.
Once you have a plan to help protect your own income, determine what your business requires for protection. One option may be a business overhead expense policy. With this coverage, should you become disabled under the terms of the policy, the policy provides funds to reimburse specific business expenses, helping to keep the business operating without interruption.
Small businesses with more than one owner can be especially vulnerable if one partner sustains a disability. One way to prepare for such a situation is to establish a disability buy-sell agreement, which is a contract that specifies who will purchase the business and at what price, in the event of a disability. A disability income insurance policy can be used to fund the agreement. Should the insured partner become disabled, the policy owner can use the proceeds from the policy to purchase the disabled partner’s share of the business.
The investment you made in your education and your ability to earn an income is invaluable. Disability income insurance can help protect a portion of your income, while other types of coverage can help protect your business, in the event of a disability.