What would happen to your business if you lost mobility for one year? How about a six-month recovery from an eye injury? An illness or accident resulting in disability can be devastating to the unprepared small business owner.
Disability coverage may be the least understood and most neglected area of business planning. Most people know that it’s important to prepare for a possible death, but rarely do they imagine that a partner or key employees will become disabled. Yet disability can be a lot more damaging to a business than death and it is much more likely to happen.
Statistics show that, on average, one in three people will be disabled for 90 days or longer at least once before the age of 65 and that the average length of a disability over 90 days is 2.9 years. With statistics like those, and a rising incidence of debilitating diseases like dementia as well as other disabling events, a business owner must ask: “If I become unable to work, what will happen to my family and my business?"
It’s a tough question. And too often there is a rush to find an easy answer, such as tapping into existing savings or liquidating assets. Unfortunately, that is only a short-term solution. Actuaries estimate that if you saved 5% of your income for 10 years, you would run out of money after only six months of total disability. And what about your business? Your ability to contribute ceases while your business commitments continue.
The simplest way to safeguard your personal and business financial futures is to incorporate appropriate and adequate disability insurance coverage into your planning. It is a risk management tool invaluable to ensuring long-term financial stability.
What is disability insurance?
Disability insurance is an insurance product designed to replace your income if you become disabled. The best policies cover the majority of your pay cheque (after taxes) and will pay until your disability ends or until age 65, whichever comes first.
How much disability insurance do you need?
It's important for your small business to decide how much disability insurance you need and can afford. A first step is to review your assets and liabilities to determine how long you can go without income. Then assess your expenses and make the necessary adjustments for a disabled lifestyle. In the event of a disability, you might have enough financial resources for the immediate short term, but it's likely your business will need disability insurance to survive over the long-term.
Speak to an advisor
It's crucial to speak to a professional insurance advisor to get to know about disability insurance in further detail and to determine the amount and type of coverage that is right for you and your business. Why wait? If you don't have disability insurance, now is the time to contact an experienced advisor to protect yourself, your family and the future of your business.
For most business owners, it’s hard to imagine that a disability could ruin their business. But once business owners understand how disability can harm a company, they can understand why it's imperative to have the proper coverage in place.