There are plenty of good reasons to have individual disability insurance to replace your income should you become injured.

But if you own a business, it's not just about you. As a business owner, you’re probably the primary driving force of your business, as well as the bankroll. When you're planning for your business, one contingency you need to include is what would happen if you get sidelined. Here's the sobering statistic from the Council for Disability Awareness (CDA), an insurance industry group: One in four people entering the workforce will be disabled before retirement and can expect to be off the job for an average of 34.6 months. That's almost three years. It's not because they spend weekends racing motorcycles or commute long distances. Heart disease, back problems, cancer and other medical problems are more likely to cause disability than accidents.

Consider several key steps as you comb through options with your broker:

1. Disability income for you and disability insurance for your business are two different issues. You need to provide coverage for both your family and your business.

For the home front: income coverage. Figure what you'll need to cover the mortgage, cable bill, car payments, tuition and food, among other expenses.

For the business: overhead coverage. Start with payroll, rent, utilities and any equipment or vehicle leases you carry. Employee benefits and advertising are two other costs.

How do you balance both? Barry Lundquist, president of the CDA, recommends addressing your personal income needs first, then taking on business overhead coverage.

2. Shop professional and industry associations. Group rates are frequently cheaper than individual premiums. If you belong to a professional association, that's the first place to check for disability coverage rates. This is particularly important for stand-alone practices, which are likely to need a lower level of coverage (and have less financial muscle to dictate terms) than a larger business. The American Dental Association, for instance, sponsors disability income, overhead and business expense coverage for members at what potentially could be a discount.

3. Bundling gets you leverage. Another way to cut prices is to bring multiple needs to one carrier. You may get underwriters to come down on disability premiums if your company is large enough to add in group voluntary disability coverage for employees – or you can shop your personal disability coverage alongside your business overhead policy.

4. Read the fine print and consider adding riders to customize your coverage. Several key provisions will keep your family afloat and your business running. Each may end up adding to the amount you’ll need to budget for premiums, however, so investigate various options before you settle on a final policy.

“Own Occupation.” One key small-print factor is “own occupation” – a way of saying that you’ll receive full benefits as long as you aren’t working your original job. That’s an important consideration: If you are a construction contractor, you might work for a stretch as a draftsman, and you don't want to lose benefits because you did this.

Part time, full time. Use a magnifying glass on – and be sure you understand and can live with – wording in your policy that covers exactly how much you can collect in claims if you start back part time.

Replacements. Look over provisions for hiring a replacement to carry your burden and fulfill your duties on the job while you’re recuperating.

Cost increases. Inflation happens and will affect the value of your coverage. Check to see what your carrier does to adjust your coverage when costs climb.

5. Plan ahead. Start-ups – and their bosses – find it next to impossible to acquire disability or overhead coverage without a proven track record. If you’re planning to strike out on your own and your current employer offers disability income coverage, see whether you could retain the insurance after you leave and consider signing up before you hand in your resignation.

Establish an emergency fund: Overhead coverage policies typically set up a 30-day waiting period before paying claims. You may want to stash away a cushion to cover company outlays during that period.

6. Factor in your business structure. Disability can wreak havoc on different types of companies – sole proprietorships, partnerships or corporations – in a variety of ways. For an architecture firm where partners share clientele and costs, your time away will increase day-to-day pressures and fewer people will be billing to cover the partnership's monthly expenses. Then again, your engineering company might depend on two or three “brains” to solve some of the knottiest problems; losing you could affect its ability to provide services.

Structure disability overhead coverage to fill the gaps, depending on your company set-up. One option is to buy "key person” coverage that provides funding when a critical player is sidelined. This can work for a variety of business types.

If your business is a partnership, you and your partners should examine several other possibilities. One is disability buyout coverage, which can foot the cost of a disabled partner’s share if he or she will be out for so long that it makes sense to leave the business. Attorneys often recommend coupling buyout policies with a buy-sell agreement that spells out the terms – including the price paid for each partner’s share or the formula used to value chunks of the company.

The Bottom Line

Running a small business is taxing when you’re in the best of health. Considering how much your brainchild probably relies on you, it makes sense to protect it – and your family – from your inability to work when making insurance plans.

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