Business Insurance 21 - The Effect of a Disability of Sole Proprietor

A disability can occur when we least expect it and, as you’ve already indicated, the consequences can be devastating. In most cases, the disabled person’s income will be needed to help the family survive. However, replacement income can be provided by a Group L.T.D. or an individual policy. In this article we will examine the effect and solution for sole proprietor

If disability occurs, there are 4 methods that a sole proprietor can use to stay in business.

a) Sell the business that creates some problems

i) How to find a buyer who knows how to run the business and who has the necessary funds.

ii) the business, with the one key person disabled, soon has a deep discount sale price attached to it.

b) Taking over the business by family member

It is quite difficult to replace the disabled person and become responsible for the business’ survival. If it is a spouse who is taking over, they may have the increased burden of the family, including caring for the needs of the disabled partner.

c) Hire a manager

The cost of their salary is added on to the need for continuing income for the owner’s family, including operating expenses, there may be too great a strain on the business. It may be challenged to produce sufficient income to cover these amounts.

d) Disability insurance

Disability insurance helps to create

a) Income to finance replacement

b) Confidence in the disabled owner

c) If a disability continues, it provides time to be able to sell the business where it will almost always obtain more money than would be derived from a forced sale.

In case of business wind up because of disability of sole proprietor

If a sole proprietor owns a productive business, they may have assets that can be sold. A store, stock or plant and machinery or other assets can be made into income. Even broken up, there may be some value to the machine’s parts while receiving disability income from insurance company.

Please note that a sole proprietor who is working in their profession does not enjoy many of the advantages of a production-based sole proprietor, because an education and a particular skill with a high degree of trained knowledge cannot really be sold for parts.