Disability Insurance for Business Owners can be vitally important to the stability of your practice should you suffer an unforeseen injury or illness. If you own your own practice, you should seriously consider your obligations over and above replacing your personal income. After all, as a business owner, you live with two budgets – one at home and another at your firm. An unexpected accident or illness can destroy or seriously impair your ability to keep your business running, make practice loan payments, or fulfill the buy-out provision in your partnership agreement. Consider the following types of coverage:
Business Overhead Expense Disability Policy:
This type of disability policy provides funds to help cover your ongoing business expenses such as your office rent, employee salaries, utility bills, advertising expenses, and many others. This may help you keep your practice open during a disability – giving you the time to recover and return to work in a healthy practice. If your disability is total, then the policy will help support a higher practice value to help you sell under the most favorable conditions at the best possible price.
Overhead Expense disability policies can generally be purchased with benefit amounts ranging from $1,000 to $50,000 per month with a choice of 12, 18 or 24 month benefit periods. Elimination periods of 30, 60 or 90 days are commonly available as are optional benefits such as “partial or residual” benefit riders and “future increase option” riders.
Business Reducing Term Policy Rider:
This type of disability policy rider on an Overhead Expense DI policy directly pays your lender benefits to cover 100% of your monthly practice loan payment in the event of a disabling injury or illness. In most cases, when an attorney borrows money to start a new business or buy an existing one, they are required to cover the majority of the monthly loan payment with a disability insurance policy. If eligible, the disability benefits are paid directly to the lender as “loss payee” to save the loan from default due to the disability of the borrower.
BRT policy riders can cover up to 100% of the monthly loan payment and have a benefit period from five to 30 years (age limits do apply, ask for details) and are very affordable.
Disability Buy-Out Policy:
One of the most overlooked insurance issues for small business owners is the disability buy-out policy. These policies provide the funding for the disability provision in a partnership agreement upon the total disability of one or more of the partners in a partnership. It allows for a clean transition of the business by providing cash to assist in the purchase of a disabled partner’s interest – allowing the non-disabled partner to purchase their interest in the business at a pre-determined price per the partnership agreement.
Benefit amounts up to $3,500,000 per insured (subject to business valuation formulas and policy elimination periods) are available. Various funding methods including, “lump sum,” “down payment/monthly payment,” and “level monthly payments” are available. Common elimination periods available are 12, 18 or 24 months.
Inquire today about any of these valuable policies for business owners.