For any small business owner, ensuring the proper acquisition and set up of the key types of disability insurance is an important part of protecting both themselves and their business. For most small business operations, disability insurance is more than the protection of income loss that can occur after a debilitating injury or serious sickness to the business owner or any business partners. In most cases, a small business owner needs to consider these aspects of insurance policies for disability.
Protection of Income
Excellent disability insurance policies are designed to guard and protect the small business owner against loss of personal income. This is done by providing a percentage of the pre-disability value of income earned by the policy holder. This type of disability insurance is meant to help the small business owner, or any of his covered partners, to have funds for payment of daily living expenses that may occur.
Business Overhead Protection
When a small business owner is injured or seriously sick they have more than personal expenses to worry about. They must also pay ongoing overhead expenses following the event that caused disability. A good business disability insurance policy covers business overhead for things like building lease payments, rent expense, payment of taxes, staff salary payments and other overhead expenses that must continue to be paid. These things are necessary to be paid properly, even though the business owner has become disabled, temporarily.
Special Key Personnel Disability Insurance Coverage
If a small business depends on more than one owner, or key individual, for proper operation it is advisable for the business to have key person disability coverage. This type of coverage pays money to the company if any listed key person is deemed to be disabled and unable to work. The monies from this coverage can be used to hire a temporary replacement or outsourcing of some duties of the disabled listed key person. These policies are owned by the business and not by any of the key personnel. The company pays the premiums and benefits in case any key person listed is disabled.
Special Buyout Disability Insurance Coverage
It is not unusual for business partners to have buy/sell agreements drafted by attorneys to set out pre-arranged agreement on what should happen in the event of death or permanent disability of one of the business partners. Typically, the surviving business partner(s) will purchase the disabled, or deceased, partner’s interest in the business. This might be between the partners or take place between the remaining partners and their estate. This type of special disability insurance guarantees the business that money is available to complete these pre-arranged buy-sell arrangements, even in the worst case.
Have you thought about the purchase of disability protection for these various possibilities? What are your thoughts on the need for this type of protection for key individuals, business partners and small businesses in general?
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