Provided By: Stephen Sharpe, Northwestern Mutual
“Risky Business” takes on a new meaning to the entrepreneur who excitedly opens the doors, real or virtual, for business on that first day and awaits customers. As any entrepreneur knows, one can work hard, create a good product and maintain good business relationships — do everything right — and still some future events are beyond one’s control. A whole host of unforeseen possibilities can dash the dream, including the impact of a disability suffered by you or an employee.
Planning for success requires taking a hard look at where the business is vulnerable. The likelihoods vary with age, but during your income producing years, you are nearly twice as likely to become disabled as you are to die before reaching age 65.1 A sound risk management plan’s purpose is to lessen the impact of a disability on your business. What are your options?
There is coverage to protect human capital, and coverage to protect your ability to do business. The specific types of insurance you need will depend upon the type of business you have and how you conduct that business. But selecting the right coverage for your business should not be a “deal or no deal,” decision. The challenge is to find the right combination of policies that provide protection without duplicating coverage.
Protecting Your Employees
As your company grows and you add employees, it becomes increasingly important to protect your human capital. Quality employees are vital to the success of your business. Offering disability income insurance to protect your employees can also help you to create a competitive benefits package, which can enhance your recruiting and retention of employees.
While most states require companies to carry workers’ compensation to cover the cost of work-related injuries, it’s important to keep in mind that less than 5% of long term disabilities are work related. The other 95% are not, meaning Workmen’s Compensation doesn’t cover them.2 In fact, the major causes of disability are diseases, such as cancer, heart disease and diabetes.3
Valuable disability income protection can be provided for employees through group disability income insurance, individual disability income insurance, or a combination of the two.
Protecting Your Ability to Do Business
Protecting your ability to earn an income and offering income protection to your employees certainly makes good business sense, but what happens when a loss directly impacts your bottom line? How will you protect your business and provide the money to keep your business running if you or another owner essential to maintaining the income becomes unable to work? There are specific types of insurance to consider:
– Disability overhead insurance can provide needed cash to meet business expenses such as rent, payroll, benefits, utilities, taxes, maintenance costs and others.
– Disability key person insurance can help your company weather the disability of a key employee.
– Disability buyout insurance can help purchase the business interest of a totally disabled owner.
Protection That Grows Along with Your Company
With a lot of hard work and a little luck, small businesses do prosper and grow. The right risk management plan must also evolve to protect your business through all its phases of growth. Keep in mind that there are as many additional types of insurance coverage as there are unique business needs. That’s where an experienced financial professional can help you focus on your current and future business risks to select the right types and amounts of coverage to meet your ongoing needs. Partnering with a financial professional gives you the benefit of another expert keeping a watchful eye on the growth of your business.
By lessening the effect of serious potential business problems with a sound risk management plan, you protect and enhance your potential for business success.
1. Society of Actuaries Individual Disablity Experience Committee 1999 Preliminary Table, most recent update; Society of Actuaries 2001 Valuation Basic Table most recent update..
2. Disability Statistics, Council for Disability Awareness, March 2013.
3. Disability Statistics, Council for Disability Awareness, March 2013.
Article prepared by Northwestern Mutual with the cooperation of Stephen Sharpe. Stephen Sharpe is a Financial Representative with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wisconsin, and its subsidiaries. Financial Representative is an agent of NM based in Fairview Hts, IL. To contact Stephen Sharpe, please call (618) 277-3200, e-mail at email@example.com or visit the Website at stephensharpe.nm.com.