Let’s face it – launching your own business has enough unknown risks to begin with. So any risk that can be managed and taken off the table is a good thing. We work with many businesses in the DC Metro area doing just that – managing the known risks so that you can do what you do best without having to look over your shoulder. The most common insurable risks that we work with are;
- Key Person Planning
- Business/Professional Disability Overhead Expense
The success of any business normally is directly related to the Owners and the people it employs – the ‘human value’. Many small to medium size businesses have ‘Key People’, whose talents and efforts have more of a direct effect on profitability. Smaller businesses are at more risk if a ‘Key Person’ suddenly is no longer able to work, as they normally do not have multiple employees at the same skill and talent level. If a ‘Key Person’s’ departure is planned, as in the case of retirement or voluntary termination, you can prepare for the loss and take steps to minimize its impact. However, if the Key Employee becomes disabled or suddenly dies, the loss is unpredictable and leaves your business exposed to financial risks. Key Employee Life and Disability insurance can help protect your business against these losses and exposures.
Key Person Life Insurance – Should your business loose a Key Person through death not only have you lost a friend and business associate, but you have lost one of the greatest assets of your business. A Key Person life insurance policy is owned by the business and the business is the beneficiary of the policy. The generally income tax free death benefit (AMT is sometimes triggered) of the policy can be used to insulate the company from losses in profitability due to the loss of the Key Person and help offset the costs of finding and training a replacement.
Key Person Disability Insurance – Should you loose a Key-Person due to a disability the loss is the same as death, or possibly greater should their salary be continued during their disability. Another way a business can protect itself against the risks associated with the disability of a Key Person is ‘Key Person’ disability insurance. A ‘Key Person’ disability insurance policy typically names the employee as the insured and the business as the owner, payer and beneficiary. The benefits of the policy are paid to the business, in order to compensate the business for the loss of profits while the ‘Key Person’ remains disabled. Benefits are available when they are needed most, the plan is easy to administer and is very economical.
Disability Overhead Expense Planning – As a business owner there is no worse fear than becoming disabled! We all know that ‘Good Luck’ alone does not build a successful business. However ‘Bad Luck’ due to a long term disability could sure end one quickly! Personal income is either drastically reduced or discontinued which is bad enough, but then a disabled business owner must also continue to pay overhead expenses such as rent, normal bills, employee salaries and more. This can kill a business. If you were disabled and your business had to continue without you for a while, how would the ongoing expenses of operation be paid?
You may think that the business will be able to get by in your absence, but that is a humble assumption. Very few businesses can actually continue without interruption during the total disability of an owner. In the case of Professional businesses, only another licensed Professional can continue the practice in order to keep the doors open. What are the alternatives? Going to the bank for a business loan is difficult when business is good, never mind after a Principal or business owner just become disabled.
First, find out what expenses qualify for coverage and how much ‘Disability Overhead Expense’ insurance you need.
The following business overhead expenses are typically covered by an Overhead Expense disability policy:
- Interest payments on outstanding eligible business debts
- Utilities (heat, water, telephone, electricity, etc.)
- Employees’ salaries and payroll taxes
- Postage and stationery
- Equipment maintenance
- Rental, lease, or depreciation of office equipment
- Monthly average of taxes on the premises
- Insurance premiums for Workers’ Compensation, Employee Medical Plans, Employee Taxes, General Liability, Professional Liability/Malpractice
- Accounting fees
- Professional memberships and/or subscription dues.
Click here to use our calculator to determine exactly what the monthly cost to keep your doors open for business really is. Disability Overhead Expense insurance is designed to reimburse a Professional or Business owner eligible expenses during a total or partial disability. The business owns the policy, is the beneficiary and pays the premium, which are tax deductible to the business. Having proper Overhead expense coverage allows a business owner to concentrate on getting better during a period of disability, without feeling the pressure of returning to work too early because you have to. Most importantly, Overhead expense coverage GUARANTEES that you have a practice or business to return to after your disability has ended!
Call our office today for a no obligation consultation and to get the information you need to manage and insure your business risks. Have the confidence that even under adverse conditions your business will not only survive but thrive!