Skip Navigation

Have Questions? Call Us! (866) 868-0099

Life Insure.com

  • Life Insurance
    Term Life Insurance Quotes In minutes! No personal information required.
    Information
    • Life Insurance FAQ
    • Life Insurance Glossary
    • 8 Types of Life Insurance (and How to Choose the Right Policy)
    • Life Insurance Application Process
    • High-Risk Life Insurance
  • Final Expense Insurance
    Final Expense Insurance Quotes In minutes! We never sell or share your info.
    Information
    • Final Expense vs Burial Insurance
    • The Complete Guide to Final Expense Insurance
    • Guaranteed Life Insurance | A Senior’s Best Friend
  • Disability Insurance
    Get Disability Insurance Quotes Don't worry! We never sell or share your info.
    Information
    • FAQs
    • Disability Insurance Glossary
    • Disability Facts and Statistics
    • Disability Insurance for Dentists
    • Disability Insurance for Lawyers
    • Disability Insurance for Physicians
  • About
    • About Us
    • Contact Us
    • Customer Reviews
    • Our Application Process
    • Privacy Policy
    • Legal Notice & Disclaimer
  • Blog
    • Life Insurance
    • Disability Insurance

Disability Insurance for Business Owners & Executives

Disability Insurance for Executives
Happy business executives giving high five in conference center

Why Business Owners Need Disability Insurance

The need for disability insurance for executives and business owners is clear. When you are an entrepreneur, your ability to earn a living is directly proportional to your ability to operate your business. No matter what type of company you own, when you’re in business for yourself you don’t earn money simply for putting in hours at work. You have to be able to actively work in and on your business on a regular basis in order to generate revenue necessary to create an income for yourself and your employees.

Disability Insurance for Executives

When a small business owner becomes disabled, both personal finances and the company’s ability to continue operating are jeopardized. When you own a small business, it’s certainly important to protect your personal income with disability insurance for executives and business owners. Further, it’s also necssary to take steps to make sure you don’t find yourself in a position of being unable to cover your company’s overhead expenses if you become disabled for a period of time. That’s why small business owners are well served by setting up business overhead coverage for their companies as well as professional disability insurance for themselves.

Types of Small Business Disability Insurance

As a business owner, setting up disability insurance for small business is one of the most important things you can do. For entrepreneurs, proper disability insurance coverage requires more than just taking steps to protect personal income following an injury or illness. Business owners’ need for disability insurance often necessitates three types of disability insurance policies:

Income Protection

Own occupation disability insurance provides personal income protection, providing a percentage of pre-disability income to insured individuals. The benefits you receive under this type of policy are intended to help you meet the expenses of daily living.

Business Overhead

In addition to being concerned about personal expenses, entrepreneurs must also take steps to make sure they can continue to pay business overhead expenses following a disability. The best small business disability insurance plans include business overhead coverage, which provides funds to take care of building leases, taxes, staffing expenses, and other operating expenses in the event the owner becomes disabled.

Key Person Disability

Many small businesses need the added protection of key person disability insurance. This type of coverage pays benefits to the company if one of the owners or another key person experiences a disability. Proceeds can be used to hire a replacement or an outside firm to handle services the covered individual is no longer able to perform. These types of policies are owned by the business rather than by the insured individual. The business pays the policy premiums, and receives the benefits in the event that the person covered by the policy experiences a disability. If the covered key person becomes disabled, the business will receives either a lump sum payout or monthly payments that can be used to pay the expenses incurred when hiring outside help to take care of the duties ordinarily handled by the disabled individual.

Disability Buyout

Do you have business partners? Have you stopped to think about what would happen to your business of one of the owners was to become disabled? Many business partners draft buy-sell agreements that specify what actions should be taken in the event that one or more of the partners becomes unable to work due to a disability. These legal documents also spell out the course of action that will be followed if one of the partners dies.

In most cases, these types of agreements specify that the partners who will continue to run the business will purchase the affected partner’s stock, either from the individual or his or her estate (in the event of death). When such agreements are drawn up, it’s common for the company to purchase both key person life insurance and disability buyout insurance. This type of disability insurance for business is designed to make sure that funds will be available to execute the buy-sell agreement in the event of a worst-case scenario.

Disability Insurance and Taxes

When you’re choosing disability insurance, taxes are an important consideration. The time to make sure your questions about disability insurance and taxes are answered is before you purchase a disability policy. That’s because the answer to the question of whether or not benefits are taxable is based on the manner in which policy premiums are paid.

Disability Benefits That Are Not Taxable

Disability Benefits are not taxable if the policy premiums are paid by post-tax dollars. When you take out an individual disability policy that you pay for yourself, you’ll be using money that you’ve already paid income tax on to pay the premiums. If you become disabled and receive disability benefits, the funds you receive will not be taxable.

Taxable Disability Insurance Benefits

Typically disability insurance benefits paid under a group disability benefit program are taxable as ordinary income. That’s because the policy premiums are either paid by the employer or are paid by the employee with pre-tax dollars under a payroll deduction plan. Keep in mind that any benefits you receive under a policy with premiums paid with pre-tax dollars are subject to income tax liability.

Business owners, be sure to check out Business Life Insurance.

  • Author
  • Recent Posts
Richard Reich
Follow Me
Richard Reich
President at Intramark Insurance Services
In my 20+ years as an independent life and disability insurance broker, I have personally assisted thousands of clients with their life and disability insurance needs.

I believe that when people shop for insurance (or anything else, for that matter) on the Internet, they are looking for a simple, non-intrusive, non-pressure method of doing so.

I strive to treat my prospective clients with the utmost respect and I believe an educated prospect can make the right decision without sales pressure.

Being independent, I represent many highly-rated insurance companies and, because I am not beholden to any one insurance company, my focus is to find the right company and policy for each individual client.
Richard Reich
Follow Me
Latest posts by Richard Reich (see all)
  • Own Occupation Disability Insurance - May 25, 2023
  • Long Term Disability Insurance – A Complete Buyers Guide - April 25, 2023
  • Corebridge Financial (Formerly AIG) - April 21, 2023

Lifeinsure.com

450 N. Brand Blvd., Suite 600
Glendale, CA 91203

Monday – Friday
8 A.M. – 5:00 P.M PST

  • 1-866-868-0099
  • Contact Us Online

© 2022 Intramark Insurance.
Privacy Policy
Legal Notice & Disclaimer

  • HOME
  • Life Insurance
  • High-Risk Insurance
  • Disability Insurance
  • About LifeInsure.com
  • Blog

RESOURCES

  • Life Insurance Types
  • Our Applicaiton Process
  • Term Life Insurance
  • No Exam Life Insurance
  • Final Expense Insurance
  • Disability Insurance
  • FAQs
  • Life Insurance Dictionary

RATINGS & SOCIALS

Intramark Insurance Services, Inc., Insurance Services Office, Glendale, CA

  • Facebook
  • Twitter
  • Youtube
  • LinkedIn

Here is the legal information we're required to provide you. LifeInsure.com, a Califronia corporation and subsidiary of Intramark Insurance, is a licensed independent insurance broker. The information provided on this site has been developed by LifeInsure.com for general informational and educational purposes. We try hard to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application.