When you own a business and have employees, becoming disabled impacts you and your family and your employees and business. As a business owner, you may be responsible for the day-to-day operations, ensuring the business' finances are in order and reducing various risks so your business can stay operational. But if you become disabled, how will your personal and business financial situations be impacted? That's where disability insurance can help.
It is important for you to understand that disability insurance for you and disability insurance for your business are two different things:
Long-term disability insurance- Long-term disability (LTDI) insurance is designed to replace a portion of your income if you become permanently disabled or are diagnosed with a chronic illness and are unable to work. Income coverage is essential to help you cover your living expenses such as mortgage payments, food, utility bills, etc.
Getting approved for LTDI may be more complicated for a business owner than an employee because you will need to prove your business has been profitable for two years and that you've paid yourself regularly for the same period, or maybe longer.
The most common reasons for long-term disability claims include:
- Musculoskeletal disorders (27.6%)
- Cancer (15.0%)
- Injuries such as fractures, sprains, and strains of muscles and ligaments (12.0%)
- Mental health issues (9.3%)
- Circulatory (heart attack, stroke) (8.2%)
Overhead business insurance- Overhead business coverage is designed so that if you become disabled and cannot work, you have financial resources for your business. You will still need to cover payroll, overhead expenses such as rent, utilities, equipment leases, etc. if you intend to keep the business operational.
What about Workers' Compensation and Social Security Disability Income?
Often, people think that if they become disabled that Workers Compensation and Social Security Disability Income (SSDI) will cover all of their income replacement. That is not the case, as worker's compensation generally covers a portion of your income for a set period, depending on your state's workers' compensation rules. Workers' Compensation provides benefits until you recover from your work-related injury. SSDI covers long-term disability and may be difficult to receive approval since SSDI determination is based on disability and work credits and can take time. Here are surprising statistics about Workers' Compensation and SSDI:
- Workers’ Compensation only covers time away from work if the disabling illness or injury was directly work-related. In 2019, less than one percent of American workers missed work because of an occupational illness or injury.
- From 2009 to 2018, only 32 percent of Social Security Disability Insurance (SSDI) claimants had their applications approved: 21 percent at the initial application stage and the remainder after a reconsideration or appeals process.
- It generally takes three to five months from time of application for SSDI benefits to get an initial decision.
- The backlog of appeals cases was more than 400,000 in fiscal year 2020, with 38 percent of them being over nine months old.
- The average SSDI benefit for a disabled worker as of February 2021 was $1,279 a month.
- That equates to $15,348 annually – which is below the poverty guideline $17,420 for a two-person household.
You must plan and consider how becoming disabled impacts you, your family, your business, and your employees.
The content in this material is for general information only and is not intended to provide specific advice or recommendations for any insurance product. To determine which product(s) may be appropriate for you, consult your financial professional prior to purchasing.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by Fresh Finance.
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