Most business owners would acknowledge that, in the event of a major fire, they would not be able to rebuild their facilities or replace inventory without insurance. However, in terms of a business owner’s risk exposure, a major fire and most other risks pale in comparison to the loss of their ability to generate an income due to an illness or injury. The chance that an average worker will be unable to work and generate an income due to a disability is four times greater than the risk of dying before age 65. The risk exposure is even greater for business owners because they have a business to protect.
Most People Underestimate the Odds of a Disability
Most people underestimate their likelihood of becoming disabled. Just 2 percent of American workers think they could become disabled for three months or more, whereas the actual odds are around 25 percent.
A typical male worker, age 35, with an office job that includes some outdoor physical responsibilities, has a 21 percent chance of becoming disabled for three months or longer during his working career. For a person with that profile, a disability lasts 82 months on average. Overall, 30 percent of individuals between 35 and 65 will become disabled for at least 90 days, with one out of seven lasting five years or more.
Most Business Owners Lack the Capital to Replace their Income
According to several studies, the vast majority of American workers would be unable to support themselves for more than 90 days if they lost the ability to earn an income. Because business owners tend to have a large portion of their capital tied up in their business, they are even less likely to be able to overcome a loss of earnings for an extended period.
For mid- to late-stage business owners, their ability to generate an income is still their most significant asset. A disability that prevents them from doing so for a year or more could substantially deplete their capital. It could be well into their future when business owners have sufficient capital to self-insure against a long-term disability. The only solution for business owners, regardless of their stage of business, is an individual long-term disability policy.
Business Owners Have More at Stake
The stakes are even higher for business owners because their businesses may rely heavily on them to survive. Businesses with employees or partners are especially vulnerable and risk substantial financial hardships should the business owners be unable to perform their duties. Business owners who hope to return to a viable business upon their recovery should consider purchasing a business overhead expense policy.
Working with a Disability Insurance Specialist
Disability insurance is much more of a specialty product today because fewer insurers offer it. It is a more complicated product than life insurance because it has many moving parts. Having the right type of coverage in a properly structured policy is critical for protecting your most valuable asset. You should only work with a disability income specialist who specializes in working with business owners.