Disability insurance for my business expenses

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PostPosted: Mon Mar 15, 2010 11:33 am   Post subject: Disability insurance for my business expenses  

I have my own small business in Clark. I'm eager to know if it's true that disability insurance might also cover for my business expenses!


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Dreadedturner
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PostPosted: Tue Mar 16, 2010 11:31 am   Post subject:   

Many of the small business owners forget to cover unforeseen risks that may affect their business operations in the long run.



These are people who'd otherwise be careful in protecting their personal income. Whenever a key employee is struck with long term disability, these businesses tend to crumble. All this happens because their overhead costs mount beyond a feasible point.

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PostPosted: Wed Mar 17, 2010 12:28 am   Post subject:   

Individual Disability coverage won't, but disability overhead will.

InsuranceExpert
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PostPosted: Wed Mar 17, 2010 3:05 am   Post subject:   

There are two types of policies that business owners look at when it comes to protecting their business income.



The first is what InsuranceExpert is talking about. It's called Overhead Expense Reimbursement Insurance. It reimburses the business for regular monthly business expenses when an owner is on disability claim (too sick or hurt to work). Keep in mind that this is a reimbursement, not a pre-emptive payment. The expense has to be incurred before the disability check can be cut.



The design of an overhead expense policy will vary depending on the type of business structure you use.



Example:



Sole props will likely take the shortest benefit period available. Sole Proprietorships are obsolved upon the incapacitation of the owner, so if you go out on claim you're likely looking for enough coverage to keep certain expenses under controll as you work to sell off the business.



S-corpos, C-cops, and LLC. can all be transfered in the event of an owners disability, this might take longer than the liquidation a sole prop would go through, so some times a longer benefit period is attractive.



The other type is reducing term product used for fix term obligations, like bussiness loans or rent for example.

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PostPosted: Wed Mar 17, 2010 5:08 am   Post subject:   

I think the overhead expenses that are covered would include things like rent, salaries for your employees etc.

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PostPosted: Thu Mar 18, 2010 1:55 am   Post subject:   

Quote:
I think the overhead expenses that are covered would include things like rent, salaries for your employees etc.




Yup. Business Overhead Expense policies cover the usual and typical overhead of a business in the event of the owner's disability as defined in the policy. There are various flavors of these kids of policies out there, but they're typically going to cover rents/leases, employee salaries, standard overhead stuff like utilities and several other things.



It's important to remember that these policies normally won't cover the owner's salary, inventory or capital goods.



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PostPosted: Thu Mar 18, 2010 6:33 am   Post subject:   

Quote:
There are various flavors of these kids of policies out there, but they're typically going to cover rents/leases, employee salaries, standard overhead stuff like utilities and several other things.




You're right, these policies will cover utilities. I hope they will also cover leasing expenses associated with business equipments as well as business debt interest.
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PostPosted: Thu Mar 18, 2010 2:26 pm   Post subject:   

Quote:
You're right, these policies will cover utilities. I hope they will also cover leasing expenses associated with business equipments as well as business debt interest.




Yes possibly, but since most OE policies typically max out at two years a 3 year business loan could create a problem if the plan is to cover it with an OE policy.
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PostPosted: Fri Mar 19, 2010 3:38 am   Post subject:   

Once your business expenses are protected, you'll have some time to evaluate the disability effects on your business in the long run. This will help you manage things and plan accordingly. But, please take a look at the waiting period while you're signing up. There are a variety of options coming with different policies.

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