One of the compelling and common characteristics of successful owners is their optimism. Their “glass is always half full” attitude results in the risk-taking, perseverance, and innovation it takes to build and grow a successful business. And, like it is with any personal strength, this strength of optimism can quickly become a weakness when there is a need to plan for the gloomy business contingencies of death and disability. What happens to the business due to either of these less than optimistic events is probably the last thing an owner wants to think about.
And, perhaps some business owners don’t care if the business fails as a result of one of these events. Though, our experience has been that most owners do very much care about what happens to the business and all its stakeholders. We’ve also observed, however, that the planning needed is often deficient. And, one area that is most often overlooked is an owner’s potential permanent disability.
Whereas it’s fairly common for a business owner to have a level of life insurance protection (although often outdated in need of review) to benefit their business as well as their family, in the event of death, it’s not nearly as common to see the risk of permanent disability addressed adequately, if at all.
And, becoming disabled for more than three months are greater than the chances of dying at every age:
Over one in four 20-year-olds will become disabled before reaching age 67. (1)
Age 30 - the chances of disability are approximately 2.3 times greater than death
Age 40 - the chances of disability are about twice that of death
Age 50 - disability is 50 percent more likely than death (2)
Not only does the risk of disability rise as we get older, but the severity of any disability that is incurred also tends to increase with age (3)
Your permanent disability (or death) and incapacity would most likely have the same impact on your business as the loss of any key employee. All that you bring to the table in making the business a success, your experience, talents, knowledge, relationships would all be tough to replace. And, there could be additional challenges such as the loss of concerned stakeholders, weakening financial strength of the business, bank financing re-examined, bonding capabilities interrupted, potential non-renewal of personally guaranteed leases, etc., etc. as a result of you not being able to work in the business.
The bottom line is this, that the value of your business could decrease significantly in the event of your premature permanent disability and incapacity. All stakeholders would be impacted, and perhaps your family as well if financially dependent upon the continued success of the business. Make sure you’ve thoroughly thought through this risk with your insurance professional. Too often it’s neglected entirely. You can also contact us for any assistance needed.
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Endnotes:
(1) The Facts about Social Security’s Disability Program, Social Security Administration Publication No. 05-10570, January 2018.
(2) 1985 Commissioners’ Disability Individual Table A and 1980 Commissioners’ Standard Ordinary Mortality Table.
(3) Americans with Disabilities: 2010, U.S. Census Bureau, Current Population Reports, July 2012.
