We have previously discussed how important it is to have a Disability Income Protection Plan for the continuation of your hard-earned business. The reason is obvious. If you could no longer be gainfully employed, how can you sell your interest in your business? This sale could be to a partner or if you are a one-man operation it could be to a family member, a business owner in a related field or even a competitor. There are two viable options, one of which is more costly than the other.
First, the individual buying your business could take working capital from profits and use this money to buy out your practice. This obviously is the more costly option. The problem worsens if there is a major problem within the business and/or we suffer through another recession. The question becomes how can the new owner sustain this monthly additional cost?
The alternative to this would be to have a Disability Buy-Out Insurance Plan in place to protect and continue your business in the event of a permanent disability. It all comes down to the basic premise of Insurance. That is, you are shifting your liability to an Insurance company. The plans you use yourself are paid for on a dollar for dollar basis or even higher when you factor in the taxes you must pay. On the other hand, with a Disability Buy-Out Policy, you are paying pennies on the dollar. Depending on your age, it could be between two to five cents on every dollar of benefit you insure. Thus, this option becomes a more cost-efficient consideration.
Next we will be discussing the basic provisions of Disability Buy-Out Coverage.