Small Businesses and Disability Insurance:
Many small business owners focus on their employee's health insurance and liability needs, but fail to purchase enough coverage to protect themselves. Disability insurance is something that many small business owners may need, particularly if they are the sole employee or manager of the business. A sudden disability may spell economic ruin for a business and its owner.
Recent statistics indicate that the prevalence of major disabilities is rising, up to 400% during the past five years. In addition, these statistics also show that nearly one in seven people will become disabled for at least five years after the age of 65.
These figures highlight the need for disability insurance. If you were planning on relying on social security coverage in the event that you become disabled, this is not an effective management of this risk. Typical disability benefits from Social Security are not adequate to provide business owners the financial stability to remain afloat.
Here are some tips on what to think about before selecting a disability insurance policy.
- Figure out how much coverage you need. It is important to make sure that you will have enough disability coverage should you become incapacitated. Making the decision ahead of time will spare you the problem of finding out too late that you did not purchase enough coverage.
- Check the definitions of several policies. Each insurance company may define disability in a different way. Make sure that you read the small print on several different policies before making your final decision. It is important that you share the insurance company's definition of disability ahead of time.
- Does the policy provide a COLA? A COLA is a Cost of Living Adjustment, which is essential when you are disabled. This means that your benefits would go up as your cost of living increases due to inflation.
- Find a group plan. Business owners may be able to take advantage of professional group plans that provide disability insurance to several business owners. This type of plan can greatly reduce your insurance costs.
- Does the plan match what you do? If a disability insurance policy is geared towards an office worker, it would not be suitable for a construction contractor. Take the time to make sure that the type of injury or disability you might incur at your place of work will be covered by your policy.
- Guaranteed Insurability. If you can find and afford a plan that offers guaranteed insurability, it is very important to select this plan. Guaranteed insurability means that you will be able to purchase more coverage if necessary, in the future, without having to medically qualify again.
- Non-Cancelable Policy. Again, if possible, try to find a disability insurance policy that cannot be cancelled. This will give you greater peace of mind and a greater amount of coverage. You do not need to have your insurance policy yanked out from underneath you, particularly when you are disabled.
