No only can your small business buy disability insurance, but it almost certainly must. As a small business owner, you are actually more at risk for a disability claim than salaried workers, so this coverage is absolutely necessary.
How Disability Insurance Works in a Small Business
Disability insurance policies work much the same way for small businesses as they do for large employers, except that they’re set up as individual policies (unless of course you want to include your own employees in the plan).
Disability insurance benefits will generally apply 90 days after the injury or the onset of the illness that caused your disability. Once you begin receiving benefits, they will generally cover up to 60% of your income. It’s also important to understand that for benefit purposes, your income will generally based on what it was in the previous year. This is because self-employment income is more complicated to calculate than salary income from a W-2 employment situation.
Disability Insurance Is a Must for a Small Business Owner
Most people readily understand the importance of having disability insurance while they are employed by someone else. But it’s actually a lot more important when you’re self-employed.
There are all kinds of insurance policies protecting you from various financial losses – health insurance, auto insurance, various forms of business insurance, and even life insurance. But disability is the one type of insurance that protects your income in the event that you are no longer able to work due to loss of health or ability to perform your duties. That makes it one of the very most important types of insurance coverage that you have.
It is even possible that a good disability insurance plan will one day save your business. It can provide you with the income that you need to get through a rough patch brought on by your disability, so that you can return to your business and resume operations at a later date when you are healthy again.
By contrast, a lack of disability insurance coverage could force you to close up operations for good, and ultimately have to start a new career or business when your health improves.
Disability Is Even More Important in Some Industries than Others
In industries that involve a higher risk of sickness or injury, disability insurance will be even more important. For example, it will likely be much more necessary to have disability insurance coverage if you’re running a trucking business, than if you are running an accounting firm.
Certain industries are just more hazardous than others, and can produce the types of injuries that result in either temporary or permanent disability. The more hazardous your business is, the more important it is to have disability coverage.
It’s also a fact that disability insurance coverage will be more expensive in more hazardous businesses. That once again gets back to the fact that insurance companies are more likely to have to pay a claim in those industries. But it also makes having disability insurance even more important if you’re engaged in such business. A claim is simply more likely to be necessary.
Price Is Important – But Balance That Against Policy Provisions
Price is always a factor when adding any product or service to either your life or your business. But it must always be balanced out against benefits and policy provisions when it comes to a disability policy.
There will be little point to having the least expensive disability insurance policy available, if it will not provide benefits in your time of need. For example, every insurance policy written includes definitions of the events that will trigger the payment of benefits. You have to make sure that those events match the likely risks in your industry. If they don’t, it won’t matter how inexpensive the policy is.
Get Your Policy When You’re Healthy
Much as is the case when it comes to life insurance, it’s always best to apply for disability coverage when you’re healthy. With individual policies the insurance company is likely to require a medical exam as well as a review of your medical history. They may be looking for clues that you could become disabled as a result of a serious illness that is already apparent in your medical profile.
If you apply for coverage when you are healthy, this concern will be eliminated.
Consider Group Coverage
The advantage to group disability coverage is that it can be less expensive on a per person basis than an individual policy. Of course, in order for the policy become cost-effective for you as the business owner, you will likely have to have premiums paid by each participant in the plan.
A group policy could be a good way to deal with medical complications, which might limit your ability to get a policy on an individual basis. As a member of the group, you will automatically be covered with the plan, regardless of your medical history.
You Won’t Need Disability Insurance If You’re at Retirement Age
If you are 65 or older, you won’t need disability insurance. This is because insurance companies typically will not pay benefits should you become disabled at an age when people are normally considered retired. Your eligibility for Social Security and other retirement benefits could invalidate your claim.
If you are a small business owner, and you don’t have disability insurance coverage, contact us and let’s talk about your options. Disability insurance is much more important for small business owners than it is for other folks.
