You have to spend money to make money. The old adage tends to hold true in the business world, but not everyone has money to spend. Business owners often take out bank loans in order to invest in their companies, hopeful that their dedication and hard work will pay off. Unfortunately, things don’t always work out the way people planned. If an injury or illness prevents a business owner from working, the business may suffer – but those bank loans are still due.
To protect against this risk, business owners with bank loans need bank loan disability insurance.
Disability Insurance for Business Owners
Disability insurance is important for anyone who depends on their income, and this includes business owners. However, business owners take on more risk than the average worker. As a result, they often need more disability insurance coverage.
- Individual disability insurance can replace the policyholder’s lost income during a disability.
- Key person disability insurance provides a benefit to help the company if a disability prevents a key employee from working.
- Business overhead expense disability insurance provides a payout to cover rent, utilities, salaries and other overhead expenses if the business owner becomes disabled.
- Bank loan disability insurance provides a benefit to pay bank loans if the business owner becomes disabled.
Business owners may need multiple types of coverage to make sure they have protection for both themselves and their business.
In some cases, coverage may be required. Banks are also eager to protect their interests, and some banks may require disability insurance coverage. Even when it’s not required, though, it often a good idea.
Go Big – Or Go Bust
Even in the best of times, a disability can lead to expensive medical bills and lost wages. For business owners, the situation can be especially precarious. Taking a few months off to deal with an injury or illness may not be an option – the business depends on their daily effort. If the business fails, there’s no business revenue – and no way to pay back bank loans.
Unless you have bank loan disability insurance.
Bank loan disability insurance can provide important protection for business owners. If the policyholder becomes disabled, the benefit will go toward the policyholder’s monthly loan payments.
Talk to Your Clients
If your clients own a business or are thinking about starting one, make sure they know about bank loan disability insurance.
Ask your business owner clients how they would pay off their business loans if a disability rendered them unable to run their business. If they don’t have a plan – and many won’t – suggest coverage. Be sure to explain how bank loan disability insurance provides protection specifically for business loans, while other types of disability insurance provide different types of protection.
Take a Three-Pronged Marketing Approach
You can get your foot in the door three ways: by forming relationships with business owners, banks and loan officers.
- The Business Owner: This product helps protect the business owner from having to pay back a loan while being disabled.
- The Bank: This product helps the bank avoid potential loan defaults.
- The loan officer: Typically, banks set a bonus program for loan officers on the default rate. If clients don’t pay their loans than they don’t get their bonus.
TIP: Banks usually require life insurance for a specific loan threshold. Educate banks that they also need to require business owners to have a DI Bank Loan policy whenever they require a life policy.
Want to learn more? Contact your nearest Regional Brokerage Manager and download our Business Loan Case Study.