How long can your small business stay afloat if you, the business owner would need back surgery, or have a heart attack, or some other debilitating illness or injury that would prevent you from working in your business for three months, six months, or a year?

For most small businesses, the results would be lost earning, lost customers, lost employees, and yes, closing the business down.

The latest U.S. census gives these plain facts that 3 in 10 workers will have a disability before their retirement.  If you’re age 32, your chances of being disabled for 90 days are 6.5 times greater than death. Lastly, 1 in 6 families will experience some form of disability.

My personal story highlights the need for a plan when a disability happens. I inherited rheumatoid arthritis from my grandfather, which caused me to have not one but two hip replacements. My recovery for each was over eight weeks. If I didn’t have a plan in place before my diagnosis, how would my expenses have been paid?

There are over 6 million small businesses in the U.S. A troubling fact is of those 6 million small businesses, only 23% or 1.38 million have a cash-flow protection plan in place.

I recommend that all small business have a Qualified Sick Pay Plan, along with a Qualified Business Overhead Expense Plan.

First, a Qualified Sick Pay Plan would pay the business owner up to 60% of their wages while recovering from an injury or illness. These benefits can last for one year, two years, or to age 65. One’s ability to work and earn an income is the most valuable economic asset an individual possesses. A total disability due to illness or injury could deplete, if not devastate your personal assets. Also, health costs rise because of the need for physical therapy or special equipment. A disability income insurance policy can help minimize the impact of such a devastating occurrence.

Secondly, a business owner needs a plan that will ensure his business expenses will be paid, Business Overhead Plan.

What does a Business Overhead Plan pay?

The following business overhead expenses are typically covered by a BOE disability policy:

  •    Rent
  •    Interest payments on outstanding eligible business debts
  •    Utilities (heat, water, telephone, electricity, etc.)
  •    Non-attorney employees’ salaries and payroll taxes
  •    Postage and stationery
  •    Equipment maintenance
  •    Rental, lease, or depreciation of office equipment
  •    Monthly average of taxes on the premises
  •    Insurance premiums for Workers’ Compensation, Employee Medical Plans, Employee Taxes, General Liability, Professional Liability/Malpractice
  •    Accounting fees
  •    Professional memberships and subscription dues.

I do understand the importance of taxation on business expenses, so let’s briefly examine BOE Taxation. First, my personal disclaimer is that you consult with your accountant before purchasing your cash flow protection plan: A) Premium is Deductible if paid by company B) When a disability occurs, benefits received from your insurance carrier are taxable C) However, all income used to pay business overhead expenses become a tax deductible expense to the company.

During a business owner’s disability, a loss of income will cause not only personal financial hardship but also a strain on the business itself. Fixed business expenses continue to be incurred regardless of incoming cash flow. Adding Business Overhead Expense Protection to your disability income policy can provide coverage for those fixed expenses while you are physically challenged.

Wayne Sloan




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