I am a business owner, and I worry about being unable to run my business if I get sick or hurt. What can I do to cover this risk?

I am a business owner, and I worry about being unable to run my business if I get sick or hurt. What can I do to cover this risk?

A: The majority of business owners have life insurance that helps protect their beneficiaries against the financial impact of premature death. A large percentage of business owners do not, however, insure their single most valuable asset – their ability to earn an income and manage their business.

If you are like most business owners, your family relies on your income to assure them of a comfortable lifestyle. Therefore, disability income insurance should not be considered a luxury, but an integral part of your insurance coverage plan. Although you may have other sources of income, a long-term disability, if not properly planned for, can quickly deplete your accumulated savings.

Depending on your income, the maximum coverage you can buy may replace 45 to 75 percent of your pre-disability earnings. (The higher your income, the lower the percentage of replacement benefit is likely to be.) The policy’s cost generally depends on such factors as the risk level of your occupation, your age, health, and the scope of coverage. It should also be noted that when you pay the premiums yourself, the benefits from personal disability income policies are tax free (based on current federal tax law).

To ensure the money you spend on disability income insurance is buying protection. Your contract should include the following: a favorable definition of "total disability,” a non-cancelable clause, partial disability payments, benefits payable until the age of 65 or for life, waiting period, a Social Security substitute benefit rider, and a future increase benefit rider.

Now may be the time to pay close attention to how much you should spend on disability income insurance, as well as the particular details and provisions of the disability income policy you are considering. In addition to individual disability income coverage, business owners should analyze the need for disability buy-out and disability overhead expense policies as well. Consult your trusted financial planner who can always help you make smart money decisions for your future.


Carl Mook is a financial planner and president of CM Financial Group in Sycamore. He can be reached at (815) 787-3000. Securities offered through American General Securities Incorporated, 2727 Allen Parkway, Suite 290, Houston, TX. 77019. (713) 831-3806. Member NASD and SIPC. Member if American International Group, Inc. (AIG) CM Financial Group is a separate entity from any member of AIG. AGSI does not offer tax or legal advise. Carl Mook, Investment Advisor Representative, Registered Representative.