Posted on May 17, 2014

What Small Business Owners Should Know About Disability Insurance

Small business owners invest large amounts of time, money and resources into growing their companies. Obtaining commercial insurance to protect the investment, assets, employees and customers can offer the security for companies to keep on growing. Because small businesses typically rely on the owner for managing and keeping the company operational, it is highly likely that when business owners become sick or injured, the company might not be able to thrive or survive while the owner is away. When this time off interferes with business operations, sales and profits can suffer, which in turn, begs the question: how will the owner and company expenses be paid?

Unless a business owner has significant savings or another source of income, the best way to protect the business is by purchasing disability insurance. Small business owners gain security in knowing that if they are ill or injured to the point where they cannot continue running the company, the disability coverage will pay necessary obligations to prevent late or no payments as well as eventual closure of the business. Disability is not only available for business needs, but it can also help to pay personal obligations such as mortgage, utilities and food.

Some of the more important considerations when choosing a disability insurance policy are:

  • Know what is covered . Business owners need to understand what the policy will cover and the meaning of the insurance company definition of disabled.

  • Protect against inflation . Adding inflation protection to a disability policy will allow for incremental limit increases to the policy to adjust for inflation. Some insurers will cap the benefit amount.

  • Determine proper policy period . Individuals and business owners may choose the length of time that benefits will last. Often policies can be short term such as three, six or nine months. There are also longer term policies available for one or two years as well as lifetime.

  • Choose appropriate waiting period . For disability policies, a waiting period is similar to a deductible with other commercial or health lines. Owners must choose how long they can go without income during a disability before policy benefits start. Shorter waiting periods have higher premiums, and periods come in one month, 90 days, 180 days or even up to 2 years.

  • Guaranteed Issue policies . As income increases, many business owners will want to add more coverage, but many times insurance carriers will require medical qualification to purchase or add coverage. With the option of guaranteed issue, there is no need to provide insurability.

When purchasing disability insurance, seek out a professional insurance agent or broker to assist with determining whether the disability policy is the best one to fit your needs. It can be hard to consider what may or may not happen in the future, but disability insurance gives small business owners the ability to protect themselves from the unexpected. No one wants to use up their life savings and investments when they can?t work. Disability insurance gives individuals the financial safety net needed to prevent that from ever happening.

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