Do Utah Start up Companies Need Disability Insurance?

Do Utah Start up Companies Need Disability Insurance?

By Bret Harding

Let's face it as entrepreneurs we’re rare bread, and we tend to think we have Superman’s blood flowing through our veins.  But the reality is one third of all Americans between the ages 35 and 65 will become disabled for more than 90 days, according to the American Council of Life Insurers. More profound statistic: One in seven workers will become disabled for more than five years (yikes!).

As an entrepreneur when faced with the question: does my start up need disability insurance?  YES. In fact, if you're self-employed, disability insurance is even more important for you than for the average employee. If you are injured and are unable to work, you don't have the built-in luxury of paid sick leave to tide you over. So you'll want to take a serious look at your financial situation and decide whether your cash reserves are sufficient to carry you through an extended disability. If not, disability insurance is a good idea for you. At any age before 65, you are statistically more likely to suffer a disability of more than 90 days than to die unexpectedly.
Purchasing disability insurance could be the only thing that prevents you from losing things such as your home or your business. When you're unable to work for an extended period of time because of an injury or illness, disability insurance provides a financial safety net by paying you monthly benefits until you are able to return to work.

Food for thought…let's say you net $50,000 a year in your business, and that you are 40 years old. Even if your income did not grow at all (highly unlikely), your earning power over the course of your working life is $1.25 million ($50,000 x 25 years.) Now that is a significant asset.  So, not only is disability insurance generally important for the average worker, it is specifically important for the self-employed.  The typical disability insurance payment will give you about 70% of your gross income. While not perfect, it sure beats losing 100% of your income.

Buying a Policy

There are two types of disability insurance:
1. Short term: A short term disability payment will send you a weekly check for up to two years.
2. Long term: A long term policy will pay you for two years, five years, up to ages 65 or 67, or for the rest of your life.

Whether you are shopping for short or long term insurance, there are a couple of things to keep in mind:

First, you want to buy any insurance, but especially disability insurance, from a carrier with a strong reputation for financial stability, and fairness. The last thing you need is a carrier who is unable or unwilling to pay a legitimate claim.

Look to buy what is known as a "non-cancelable contract." This is a policy that locks-in your rate and benefits. Avoid what is known as the "conditionally renewable" policy, meaning that the insurance company can alter your benefits or rates at any time.

You will want a disability policy that specifically defines what it is you do. This is known as an "own-occupation disability" policy. This means that you will be considered disabled if you are unable to perform the main duties of your current position.

Summary
Most disability insurance plans are fairly inexpensive and may not provide enough income to meet the needs of your lifestyle. Keep in mind that as a self employed individual you also do not have the advantage of Worker’s Compensation. In addition, Social Security is typically weaved with long delays and may result in financial deficit during your period of disability. 

As a self employed individual, disability insurance will provide you with a piece of mind knowing that your assets and lifestyle stay protected.

To learn more about the important role disability insurance plays in your company call Bret Harding today, or visit: www.UtahInsuranceSolutions.com