The Disability Income Insurance Loophole for New Business Owners

There are not many aspects of a financial plan’s foundation that I find more important than life insurance. Disability insurance to the small business owner however gives that stance a run for its money. Although death is inevitable, statistically speaking a disability event is far more likely to occur to a average business owner than a unexpected death. This type of scenario can be devastating to a business as the owner is all to often the primary generator of revenue. With the loss of ability to continue profit generating activities, DI can step in and pay YOU until your back on your feet and able to resume duties.

That all sounds great right?… Here is the catch, insurance companies have strict guidelines on who can obtain a policy. Due to this insurance being intertwined with your occupation, the guidelines not only account for your personal health, but your businesse’s as well!

Most companies will refuse coverage for a business or occupation that has been in operation less than 4 years. In addition, 2 of those most recent years must have returned a profit. These guidelines often sideline most new businesses from obtaining immediate coverage.

The Disability Income Loophole

A seldom thought of way around this issue brings us back home, life insurance. These days several companies offer both living benefits and disability income riders on inexpensive term life insurance policies. Living benefits are ways to access your death benefits in the case of critical, terminal and chronic illnesses. That’s right, with the right policy a insurance company will allow you to use your life insurance policy if you were to become sick and disabled. A disability income rider is exactly as it sounds, an attachment of coverage that pays you a level lump sum of money of up to to 2 years in duration if you were to become disabled. Both of these types of riders allow you to obtain coverage based on health alone with very few business requirements. This can help mitigate your risk as a new business owner until you are able to satisfy the more substantial requirements of a stand alone disability insurance plan.