Disability Insurance – New Business Owners
Does your coverage meet your need?
by Jon Glougie CFP®
Investment Advisor, HollisWealth
Insurance Advisor, HollisWealth Insurance Agency Ltd.
Disability Insurance can be a fairly straight-forward form of insurance for a salaried employee. In many cases, a salaried employee will have disability coverage through an employer sponsored plan. In some cases, an individual may wish to purchase a personal Disability Insurance policy in order to add an additional layer of protection.
In both of these cases, the disability benefit is contingent on earned income. The disability benefit that an individual is eligible to receive will always less than they’re earned income. There needs to be some incentive to try and get back to work. The monthly premium of an individual’s Disability Insurance policy will also be contingent on that person’s occupation. An occupation where an individual is at a greater risk of being hurt on the job will cost that person more for Disability Insurance.
These are common features amongst all Disability Insurance policies, but what happens to an individual who owns a small business and draws a minimal salary from their corporation? When a business is in it’s infancy stage, it is often important to re-invest the majority of the profits back into the company in order for it to grow. If the owner pays themselves a small salary and they apply for Disability Insurance, their disability benefit will be based on an income level that may not accurately cover their needs.
There are insurance products that can help these individuals.
Some Insurance companies offer Long Term Care benefits (as a stand-alone product or as a part of a Critical Illness insurance policy). Long Term Care is not a Disability Insurance policy, but if you can qualify for a Disability benefit, you may qualify for a Long Term Care benefit. If you get hurt and are unable to perform any 2 of the 6 Activities of Daily Living (bathing, clothing, feeding, transferring, toileting and continence) you are eligible to collect a Long Term Care benefit. The best part about this insurance is that it is not contingent on income levels.
There is also a form of combination insurance available to individuals under the age of 50. This insurance will provide Life, Critical Illness and Disability Insurance under one plan. Like Long Term Care Insurance, this combined coverage is not contingent on an individual’s earned income.
As your company grows, you still have personal obligations (mortgage payments, car payments and other monthly expenses) that you need to meet. If you are a business owner, you shouldn’t be penalized for keeping corporate profits in your company. You do have options available to you. If you would like to learn more about these options, please give us a call and we’d be happy to review them with you.
*Insurance products provided through HollisWealth Insurance Agency Ltd.