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Disability insurance for business owners
Find out which disability policies can protect your personal finances and your business and how to qualify for them.
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If you are injured or ill and can’t work, having disability insurance can help keep you financially afloat while you’re recovering. But as a business owner, you have more than just your personal finances to consider. Having the right kind of disability policies in place may save your business, keep your employees from losing wages and can allow you to get the rest you need to get back to work.
What's in this guide?
Can I get disability insurance as a business owner?
Yes, but qualifying for individual disability insurance can be difficult. Whether you’re self-employed or own a small business, you’ll typically need to show two years of your income to qualify. If you haven’t been in business for two years, you have the following choices:
- Show that you’re in the same field. If your business is in the same industry as your previous employment, the insurer may count that toward your two years of income.
- Prove future income. Providing contracts that prove you have money coming to you can prove future income and help you secure coverage.
- Continue a previous policy. If you know you’ll be leaving to start your own business, you can use the portability clause of your policy to take your coverage with you for the first years out on your own.
- Get starting practice coverage. Medical professionals, architects, attorneys and other professionals who are starting a practice with high-income potential can sometimes get special policies that offer minimum coverage.
- Wait two years. If all else fails, you can wait until your business has been open for two years and apply for disability insurance again.
Reasons to consider disability insurance as a business owner
Recovering from a disability could take a few months or a year or more. Having the right disability insurance policies can ensure you have monthly income for your personal expenses, plus coverage for business expenses or loan repayments. This way, you’ll have peace of mind that you and your business can survive if you’re left unable to work after an illness or injury.
As you consider the coverage you need, think about how much it might take to cover your monthly costs, such as:
- Household expenses
- Business rent and utilities
- Employee wages
- Taxes
- Equipment maintenance
What kind of disability insurance do I need as a business owner?
To fully protect both you and your business, consider the following policies:
Disability income insurance
This policy helps replace a portion of your salary when you can’t work. As a business owner, you may offer disability to your employees, but you should consider an individual policy for yourself as well. Your coverage should be large enough to help you pay your normal monthly expenses and should account for both short- and long-term illness or injury.
- Short-term disability insurance typically covers up to six months of leave.
- Long-term disability insurance picks up where your short-term policy leaves off and can cover up to ten years or until retirement age.
Business overhead expense (BOE) insurance
A BOE policy is designed to cover your day-to-day business expenses, like employee wages or rent if you’re forced to close your doors while you recover from a covered illness or injury. BOE insurance typically pays out between $500 and $25,000 a month.
Small business coverage
Some companies offer specialized disability coverage to help cover small business loan payments or to help one partner buy out the other’s share in a business if a disability keeps you from working long term.
How to buy disability insurance as a business owner
You should be able to purchase a policy from any company that offers individual disability insurance. But you may consider the following tips to make sure you get the best coverage:
- Look for an insurer that offers coverage to small businesses and the self-employed so you can have all your disability insurance through the same company.
- Check your professional organization for the possibility of group coverage. For example, if you’re a medical professional, like a dentist or vet, your professional organization may have partnerships with insurers who understand your unique needs and are ready to offer you coverage.
Compare disability insurance for business owners
Bottom line
Getting the right disability insurance for a small business owner can be complicated. Making sure you’re fully protected may take multiple policies, and getting the insurance you need might require you to provide proof of income beyond what most people need to show. But having coverage can mean the difference between surviving a disabling crisis or losing the business you’ve worked hard to build. When shopping for the coverage you need, compare disability insurance companies to get the best rate.
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