Business owners pour their hearts and souls into their businesses – along with their money and time – but the failure rate is high. You can help small business owners beat the odds with disability insurance.
When the Odds Are Stacked Against You
Data from the Bureau of Labor Statistics (BLS) shows that around one in four businesses won’t survive past its first year. The 10-year survival rate is much lower still – the BLS says only around one in three businesses created in March 2013 were still in operation as of March 2023.
Businesses fail for a lot of reasons. According to Investopedia, many businesses fail because they’re not satisfying a need, they have a bad business plan, or they lack financing. Poor choice of location, inflexibility in the face of an evolving market, and overly-rapid expansions are also common culprits.
However, not all businesses fail due to the fault of the owner. Sometimes, the business plan is great, the location is perfect, and many people are eager to hand over their money in exchange for the goods and services you offer – but failure is still a possibility. Some businesses fail because they can’t recover from a hurricane, fire, or other disaster. Others fail after being wiped out by a cyberattack. And still others fail because the owner becomes too ill to handle operations.
These events are unforeseeable, but insurance can help. Just as businesses owners secure property and cyber insurance to guard against disasters, they can secure disability insurance to protect themselves from financial setbacks caused by injury or illness.
The Odds of Disability Are Also High
Disability is more common than most people realize and may be the result of many different conditions.
- The National Cancer Institute estimates that 2 million people were diagnosed with cancer in the U.S. in 2024.
- The CDC says someone in the U.S. has a heart attack every 40 seconds.
- The Georgetown University Health Policy Institute says 16 million adults, or 8% of all adults, have persistent or chronic back pain that limits everyday activities and 83 million workdays are lost each year due to back pain.
- The Social Security Administration says a 20-year-old has a one-in-four chance of becoming disabled before reaching retirement age.
Those are scary odds. Business owners need to be prepared.
Meeting the Needs of Small Business Owners
Disability insurance helps business owners navigate a period of disability without losing everything they’ve worked so hard to build. However, as business owners have both themselves and their businesses to think of, they may need more than one type of disability insurance policy.
- Individual disability insurance provides benefits to make up for an individual’s loss of income during periods of disability. This is important for anyone who depends on regular income, whether they work as traditional employees or run their own business. Policyholders can use the benefits however they wish – for example, to cover household bills or to pay for out-of-pocket medical expenses.
- Business overhead expense insurance provides coverage for many common overhead expenses, such as rent, utilities, employee salaries, and property taxes. The benefit period usually lasts for 12 or 24 months, giving the business owner time to recover or make other plans.
- Business loan disability insurance helps cover bank loan payments during a period of disability. Any small business owner who has business loans should consider this coverage.
- Key person disability insurance provides a benefit to the business if a covered employee can’t work due to a disability. This is important if business owners depend on employees who would be hard to replace or whose unexpected departure would cause financial loss.
- Buy–sell disability insurance can fund a buy–sell agreement. This is important if one partner needs to sell his or her share due to disability – the buy–sell disability insurance will ensure the other partner is able to purchase the share.
Are You Serving Business Owners?
The U.S. Chamber of Commerce says there are approximately 33.2 million small businesses in the U.S. These businesses provide jobs as well as important goods and services for their communities, but they are vulnerable. While many business owners understand the need for property insurance, general liability insurance, and other common P&C products, they might overlook the value of disability insurance. You can help by educating them on the need for coverage and selling them disability insurance coverage.
Do you have the Business Overhead Expense (BOE) Client Handout? It shows the 16 expenses typically covered by BOE and is a great resource to share with business owners. Download your copy.