If you haven’t talked to your small business owner clients about disability income, it’s likely no one has. In fact, recent LIMRA studies indicate only 13% of small business owners have disability income insurance. Yet, who else needs to protect their ability to earn an income and the vitality of their businesses more than business owners?
Moreover, DI carriers offer multiple products geared toward business owners, so there are opportunities for multiple sales.
As a broker, you meet clients in many different types of careers. Small business owners can especially benefit from disability insurance. Owning a small business presents several unique challenges that should be considered by the owner. Not only does this client have to worry about their own expenses, but they also have to worry about their business expenses. Suffering a serious sickness or injury can impact a person’s personal and professional life. When discussing disability insurance with a small business owner, it is beneficial to highlight their unique challenges and disability products that can offset these challenges.
Personal Financial Stability
Business owners need to consider their own financial stability. Owning and operating a business is their primary source of income. Many business owners are actively involved in the operations of their business. This includes actual physical work, inventory, hiring, firing, and ensuring the business is operating smoothly. They rely on income generated from their small business to create a secure financial future. The sudden inability to work could affect both the business owner’s personal and professional life. A business owner may need to add more staff to take over the work they were doing themselves. In addition to individual disability income, they may also need business overhead expense to continue to pay the expenses of the business.
Key Findings and Opportunity
Business protection is their #1 priority. Business Overhead and key person insurance are effective ways to protect against an unexpected disability that could disrupt business operations.
If someone at a large company can’t work due to a disability, the company will likely be fine. When a business owner or key employee at a small business can’t work due to disability, the business may struggle to survive.
Business Overhead Expense Insurance
This small business disability insurance product will pay the expenses of a client’s small business in the event the owner becomes too sick or injured to work for a period of time and as a result the company suffers a loss of revenue. The policy is designed to keep a small business running for a short time until the owner is back to work. Benefit periods are between 12-24 months.
The policy typically pays for any expenses allowable on the business tax return, including the salary for a temporary employee to replace the disabled owner. Income taxes and cost of inventory are generally not reimbursed under the plan.
Key Person Disability Insurance
Losing a key employee, such as a salesperson or key operations manager, can wreak havoc on a small business’s earnings and welfare.
This small business disability insurance product provides protection for the business in the event a vital employee becomes too sick or injured to work. The policy will pay a monthly benefit to the business to cover the financial loss of the absent employee, or it can pay for a temporary worker while the key employee is out of work. This is a short-term Policy, usually 12-24 months.
Business Loan Protection
This can be a smart investment for small business owners with bank loans. During a qualifying period of disability, the insurance covers required loan payments, helping business owners to avoid defaulting on their loans.
Guaranteed Standard Issue Disability Insurance
Almost all businesses (98%) have key employees, and more than half of business owners (55%) would like to reward these key employees with additional benefits. Share the benefits of supplementing group long-term disability coverage with individual disability income insurance for greater replacement.
No medical underwriting. Just a census required. Carve outs for executives. Excellent opportunity for employers to cover the LTD gap for the higher paid executives.
Buy-Sell Disability Insurance
This can fund a disability buy–sell agreement for small businesses with two or more owners. If one partner has to sell his or her share in the company due to disability, a buy–sell disability insurance policy can fund the purchase of the shares by the company or other partners.
Confidence in business succession plans has reached record levels.
The most popular–and growing—succession strategy is to give the business to family members. Share five important questions for employers to answer about their buy-sell agreement, including if it’s properly funded with both Disability Buy-Out and life insurance.
The Bottom Line for Small Business Owners
Small business owners work hard to keep their businesses running. As a result, they’re able to generate a living for themselves, provide a source of employment for others, and become an integral part of their local communities. Unfortunately, a disability can undo all of this hard work. Without appropriate insurance coverage, some businesses may not survive a period of disability.
Review your files and schedule appointments to meet with your business owner clients. Share the importance of not only protecting their paychecks, but also their businesses. Call Source Brokerage, Inc’s disability income specialist to tailor disability income plans for your business owner clients. We can also walk you through each of the plans, so you can provide your clients with the most up-to-date information.
Ready to get started or learn more about disability products for small business owners? Contact Steve Crowe at ext. 222 or request a quote.
