Individual disability income insurance for small business owners

Individual disability income insurance for small business owners

Running a small business is a full-time job and then some. As a small business owner, you’re responsible for overseeing every facet of your company, including human resource responsibilities, bookkeeping, purchasing products and supplies, marketing, and making sure that your customers are satisfied. In addition, you also want to minimize the risk to your business from unexpected expenditures.

Most small business owners are covered by several types of insurance, including commercial property, general, product, and professional liability as well as workers’ comp. But, what happens if you or one of your employees becomes disabled and can’t work?

One solution to this problem is to purchase individual disability income insurance. Disability income insurance provides supplementary income if an illness or accident results in a disability that prevents you from working at your regular job. Benefits are designed to replace your take-home pay and are tax-free because you, the policyholder, paid the premiums with after-tax dollars.

What it can cover

Business Overhead Expense disability income provides benefits to help you cover your fixed monthly expenses if you should become disabled or ill. It protects your business’s expenses. Typically, these expenses include:

  • Payroll
  • Employee benefits/ workers’ comp
  • Rent
  • Utilities
  • Taxes
  • Interest on any business loans
  • Equipment
  • Maintenance

Disability Income Choice at Work provides income protection for your employees, providing them a monthly income should they become disabled or have a disabling illness. 

Individual disability income insurance coverage options include:

  • Accident Only 
  • Short-Term Options — especially designed for short-term disability; usually only offered by employers as part of an employee benefit package; monthly benefits are subject to income and occupation class
  • Long-Term Options — you choose your elimination period, and length of benefit period; you can customize coverage with special riders; maximum monthly amounts range from $500 to $20,000 and are based on your income and occupation.

The elimination period is defined as the waiting period before your coverage begins.

Policies can be tailored to fit your individual business needs and can be offered as employer- or employee-paid to help control costs. If you pay the premiums, they may be tax-deductible for the business. Employee-paid policies are paid tax-free to your employees.

Is this something you need?

Some factors to take into consideration when determining whether you need to purchase individual disability income insurance are the size of your business, the number of employees, and the additional cost to your business.

If your business can afford it, individual disability income insurance benefits are good motivators to attract and keep skilled, reliable employees. If your business can’t afford providing this coverage, you can always offer short- or long-term coverage as a voluntary benefit. 

But, the bottom line is that your business depends on you. Purchasing Business Overhead Expense Insurance as well as Individual Disability Income coverage should be part of a financial protection plan for your business.

An insurance broker can help you find the right policy to fit your business needs and finances. Daniel Fraisse, independent insurance broker, has been providing services to clients for more than 30 years. Read some of the testimonials from Dan’s customers to see why he’s considered to be one of the best insurance brokers in Los Angeles.