The main purpose of business disability insurance is to to replace an employer and employee's income should they be unable to work as a result of either an accident or a sickness. In fact, People tend not to spend a lot of time thinking about the financial devastation that could result from a disabling injury or sickness therefore if disability strikes, the balance between personal earnings and expenses suddenly is upset, and the threat of financial disaster can quickly become a reality.
(Written By Kyle J. Norton)
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Business Insurance - The Effect of a Disability of Sole Proprietor
A disability can occur when we least expect it and, as you've already indicated, the consequences can be devastating. In most cases, the disabled person's income will be needed to help the family survive. However, replacement income can be provided by a Group L.T.D. or an individual policy. In this article we will examine the effect and solution for sole proprietor
If disability occurs, there are 4 methods that a sole proprietor can use to stay in business.
a) Sell the business that creates some problems
i) How to find a buyer who knows how to run the business and who has the necessary funds.
ii) the business, with the one key person disabled, soon has a deep discount sale price attached to it.
b) Taking over the business by family member
It is quite difficult to replace the disabled person and become responsible for the business' survival. If it is a spouse who is taking over, they may have the increased burden of the family, including caring for the needs of the disabled partner.
c) Hire a manager
The cost of their salary is added on to the need for continuing income for the owner's family, including operating expenses, there may be too great a strain on the business. It may be challenged to produce sufficient income to cover these amounts.
d) Disability insurance
Disability insurance helps to create
a) Income to finance replacement
b) Confidence in the disabled owner
c) If a disability continues, it provides time to be able to sell the business where it will almost always obtain more money than would be derived from a forced sale.
In case of business wind up because of disability of sole proprietor
If a sole proprietor owns a productive business, they may have assets that can be sold. A store, stock or plant and machinery or other assets can be made into income. Even broken up, there may be some value to the machine's parts while receiving disability income from insurance company.
Please note that a sole proprietor who is working in their profession does not enjoy many of the advantages of a production-based sole proprietor, because an education and a particular skill with a high degree of trained knowledge cannot really be sold for parts.
I hope this information will help. If you need more information, please cisit my home page at :
Kyle J. Norton
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://businessinsurance21.blogspot.com/
All rights reserved. Any reproducing of this article must have all the links intact.
I have been studying natural remedies for disease prevention for over 20 years and working as a financial consultant since 1990
Article Source: http://EzineArticles.com/?expert=Kyle_J_Norton
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Personal disability insurance protects a physician’s ability to earn income, but what protects his or her medical practice? Business overhead expenses are just as relentless for those who suffer a disability. A practice that relies on a small number of people (or one person) to produce revenue is economically vulnerable if one of those individuals becomes disabled. A business overhead expense (“BOE”) disability policy will cover the ongoing operating expenses of your practice. It ensures that you do not have to use personal assets to pay for business expenses if you become disabled.
If the insured does become disabled, a BOE policy pays a monthly benefit based on business expenses, not anticipated profits. The following are some business overhead expenses that are covered by BOE insurance:
- Rent or Mortgage Payments
- Employee Salaries and Benefits
- Utility Bills
- Property Taxes
- Accounting Fees, Legal Fees, and Professional Dues
- Malpractice and Other Business Insurance Premiums
- Maintenance and Janitorial Services
- Depreciation
- Interest on Business Debts
- Office Supplies
- Other Fixed Expenses that are Ordinary, Necessary, and Tax Deductible
Some policies even cover the salary of a temporary employee hired to do the duties of the disabled. Income taxes, the cost of inventory, and the cost of furniture are a few expenses that are not covered.
There are several key areas in which BOE insurance differs from personal disability insurance.
Benefit Periods – Usually, BOE insurance policies have short benefit periods that do not exceed two years. Remember that BOE insurance is not protecting your ability to generate income—that is what a personal disability policy does. Instead, BOE insurance allows you to keep your practice open, or at least pay for its expenses until you recover. In the case of a long-term disability, it offers you up to two years to make a business decision, such as whether to shut down or liquidate your practice, without worrying about accruing debt from business expenses.
Maximum Benefits – Personal disability insurance pays a monthly benefit as defined in the policy. BOE insurance policies offer a maximum monthly benefit, but only pay the actual overhead expenses if they are less than the maximum benefit. For example, if the maximum monthly benefit is $1,000 but actual business overhead expenses are only $600, the benefit paid is $600. With some insurers, that unused $400 benefit can be applied to increase future monthly maximums or to extend the benefit period.
Taxation – As long as premiums for personal disability insurance are paid with after-tax dollars, the benefits are tax free. DOE insurance benefits are subject to income tax, but the premiums are tax deductible as a business expense.
One similarity that BOE insurance and personal disability insurance policies share is that the sooner you purchase a policy, the better. Not only will you get lower rates when you are younger and generally in better health, but additional coverage can be purchased later without providing further evidence of medical insurability.
BOE insurance is a great idea for small practices with several physicians. If one physician is disabled, their portion of business overhead expenses will be covered by the policy so the other physicians are still able to practice without an extra financial burden.
Your practice should allow you to earn income, not be a financial parasite if you become disabled. BOE insurance doesn’t just protect your practice… it protects you.
Toby Lason is a freelance writer for http://www.doctordisability.com/business-overhead-expense.html>Doctor Disability Insurance
Article Source: http://EzineArticles.com/?expert=Toby_Lason
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