Long Term Care Planning

Disability Insurance For Small Business Owners [Definite Guide]

Disability Insurance For Small Business Owners [Definite Guide]

In this article

— Last Updated May 27, 2022

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8 mins
Reviewed by
Eric Berkman

Guide Disability Insurance For Small Business Owners [Definite Guide]

— Last Updated May 27, 2022

Stephanie Wilson

Director of Operations


Reviewed by

Eric Berkman

As a small business owner, you want to ensure that you can protect your business from any risk. That can include the risk of you falling ill and being unable to lead your business – or even work at all. Disability insurance for small business owners is a necessity in order to protect yourself and your business in case of an accident or severe illness. You can even get disability insurance for employers.

However, the process of getting disability insurance as a small business owner can be confusing. You might find it hard to even understand the topic at all! With all of these terms and phrases floating around, how do you find the best deal for you? That’s why you should keep reading to answer the first fundamental question: what is disability insurance?

Disability Insurance

When it comes to defining disabilities, many people have the wrong idea. They picture a severe accident that leaves someone paralyzed, as an example. While this is certainly an example of a situation that could lead to a disability, the reality is that sustaining a disability is much more common than people think.

Having a disability can impact your quality of life in many ways, but not many people are aware of the damage that can be caused by lost income. This leads to financial disaster for those who depend on a stable income to support themselves and their families. That is the purpose of disability insurance.


Disability insurance is a type of income protection that is meant to protect your income if you develop a disability that prevents you from being able to actually work and perform your job functions. When you or loved one’s depend on your income to sustain your quality of life, both short and long term disabilities can be worrisome. Disability insurance ensures that you can get benefits and income while you focus on recovering from a disability. As for the specific benefits you could receive, it will depend on your particular insurance plan. In general, the benefits of your disability insurance can be used however you want, from paying bills to getting household essentials. The main point of having the insurance is to help mitigate that a having a disability will severely impact your income.


A disability is any condition of your body or your mind that makes it more difficult to accomplish certain tasks. Many people think of disabilities as extremes, but the truth is that there are many conditions that would qualify as a disability.  Some examples include:

  • A stroke
  • A cancer diagnosis
  • Depression, anxiety, or another mental health issue
  • Arthritis
  • Diabetes

These are only a few examples. Even if they aren’t the typical stereotype of a disability, these conditions can still make it difficult or nearly impossible to work. That shouldn’t be a concern with disability insurance; you can rest easy knowing that a condition like arthritis or mental illness will not take away your steady income if you have the right policy with the right type of coverage.

What are the advantages of disability insurance?

  1. No stress over lost income. When you have been injured or fallen ill, your first priority will need to be focusing on your own recovery; stressing over income or forcing yourself to work will make everything worse. Disability insurance takes away some of that stress.
  2. Disability insurance plans are usually flexible. Since disabilities are so wide-ranging, there is a big variety of plans out there to choose from, and there are certain benefits or options, including coverage amounts based on your income and occupation that can be chosen.
  3. No tax payments for your benefits.  As long as you make sure to keep up with your premiums (monthly fees), your benefits will be tax-free.

What are some disadvantages?

  1. There is no guarantee that you will use it. Since there is no telling if or when you will develop a disability that prevents you from doing your job, you might end up paying for disability insurance you will never need.  Like all insurance, it’s there if you need it.
  2. Disability insurance is complicated. It can be easy to get discouraged by the time and effort that it takes to get disability insurance. For example, some plans may require a medical exam to get coverage. The complicated process is why many recommend working with an insurance agent.
  3. Disability insurance has a waiting period. There is often a period of time between the official diagnosis of your specific disability, and when you can begin receiving your benefits. This depends on many factors, such as whether or not you have short or long term disability insurance as well as the outline of your specific plan.

Now that you have foundational knowledge about disability insurance such as the definition and the pros and cons, it’s time to move on to the next essential question: what is disability insurance for a small business owner? Once we know this, we can combine the two to learn about disability insurance for small business owners.

Disability Insurance

Disability Insurance For Small Business Owners

When you are the owner of your own small business, you have a lot to worry about. One of those worries can be healthcare. Since healthcare traditionally comes from your employer, figuring it out as the owner of a small business can be difficult so make sure you learn everything, even reasons for long term care insurance rejection.


Small business insurance can take on a variety of different forms, but each one is meant to help protect your business from outside risks. Just like disability insurance protects you from losing income when you are unable to work, small business insurance protects your business from any unforeseen risks.

Although there are different types of small business insurance, they all have the same goal. Some insurance companies may even offer plans that encompass multiple forms of small business insurance, so make sure to talk to a trusted insurance agent in order to find the best deal.


If you are wondering what kind of insurance a small business would need, don’t worry! Here are some common reasons to clear up any confusion:

  • Commercial property insurance in case a fire or storm damage the location
  • General liability insurance to protect you from things such as claims of bodily injury.
  • Workers’ compensation insurance that can help your employees if they are injured on the job
  • Business income insurance which can make up lost income if you shut down due to damage like a fire, storm, or even theft.

These are good examples of typical insurance for small business owners. As you can see, each one is meant to protect your business from a common threat. This is why disability insurance for small business owners is so essential, even if most people do not know about it. Keep reading to find out more!

How Does Disability Insurance For Small Business Owners Work?

Now, we can move on to explaining how disability insurance for small business owners actually works. The first point we need to establish is that getting disability insurance to protect yourself and getting disability insurance to protect your business are technically two different things. However, they work together to create a true safety net in all areas.

Personal Disability Insurance

First, you should consider getting disability insurance for yourself. The most common kind of coverage is known as “long-term disability insurance” and can guarantee benefits for years depending on the type of policy you get. You will need to decide not only the coverage that you want but also the benefits and specific aspects of your plan. The greater the benefits, the greater the monthly fee (or premium) that you will likely need to pay.

As mentioned previously, some plans may require a medical exam to verify your health. Once the process is done, you will officially have disability insurance! This is essential because it protects you, which by extension lets you protect your business.

Business Overhead Expense Disability Insurance

This is the best example of true disability insurance for small business owners. Instead of protecting your personal income, it protects your business expenses. Typically this includes the following:

  • Salaries and employee benefits
  • Property taxes
  • Rental fees
  • Utility or maintenance services

Since you aren’t employed by a particular company, you will need to demonstrate that you are the owner of a small, profitable business. This typically means that you need to prove that your business has been profitable for at least two years. It is essential to note that business overhead expense (BOE) insurance will typically only last for a short period of time, likely one or two years. In combination with your personal disability insurance, this can help keep your small business afloat as you adjust and recover from your disability.

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How Much Does Disability Insurance For Small Business Owners Cost?

It will likely be more expensive than other forms of insurance, since you will ideally be purchasing two disability insurance plans: one for yourself and the other for your business. When it comes to your own disability insurance, there are some essential factors that will impact the overall cost:

  1. Your age and gender
  2. Your general health at the time you obtain the plan
  3. The hazards or likelihood of being injured in your field of work
  4. The amount of benefits that you want

So, while the general rule is that disability insurance will be anywhere between 1% and 4% of your income, the overall number varies based on these other factors. It is the same for business overhead expense insurance. Once you calculate the fixed needs that would have to be covered, the cost will vary.  However, you may be more likely to get both sets of insurance for a decreased price if you buy them from the same company. This is something to consult your insurance agent about.

Is Disability Insurance For Small Business Owners Worth It?

Finally, you might be sitting with all of this knowledge and asking yourself whether or not disability insurance for small business owners is worth it. While only your own specific situation can determine the true answer, the general advice is that yes, it is absolutely worth it. This is because running a small business is risky. If you suddenly become unable to work, how long do you expect it to last? The worst possible scenario would be that a simple disability would completely overrun your business – and it could have been prevented. In addition, both personal disability insurance and business overhead expense insurance are needed to support you. This is because BOE insurance does not cover the lost salary of the owner. All other aspects of your business will be protected, but you need your own disability insurance to cover your personal income. In that case, the potential cost of premiums and keeping your insurance plans current will be nothing compared to the potential of losing your income.

Remember to consult a trusted insurance agent with all of your questions and concerns. They can help clarify if disability insurance for small business owners is truly right for you.

Disability Insurance For Small Business Owners

Where can I find out more and get advice on the best Disability Insurance For Small Business Owners?

Today, you can find multiple disability insurance consultants on the internet. However, choosing the right advisor is another difficult task. That’s where Policy Solver comes in!

Policy solver has knowledgeable, licensed agents, and is here to help you navigate through your disability insurance journey. We are a team of professional insurance policy brokers and we can save you time and money while finding the right policy for your specific needs. Our experienced advisors will ask you a few questions to understand your unique situation and will come up with a comprehensive analysis of different insurance plans so they will be able to recommend the best policy at the best price for you. Call us or fill out a contact form, and we will get back to you soon!


Wolstenholm, Jack. “Disability Insurance: What Is It & How Does It Work?” Breeze, 2 June 2019, https://www.meetbreeze.com/disability-insurance/what-is-disability-insurance/.

19, gregory wayne PRINCE June, et al. “6 Advantages of Disability Insurance.” Term Life Insurance, 2 Apr. 2020, https://www.termlife-insurance.com/blog/6-advantages-of-disability-insurance/.

Palmer, Joel. “The Pros & Cons of Disability Insurance, Explained.” Breeze, 25 June 2021, https://www.meetbreeze.com/disability-insurance/pros-and-cons-of-disability-insurance/.

Shih, Amanda. “How to Get Disability Insurance as a Small-Business Owner.” Policygenius, 2021, https://www.policygenius.com/disability-insurance/how-to-get-disability-insurance-as-a-small-business-owner/.

“Types of Small Business Insurance .” The Hartford, https://www.thehartford.com/small-business-insurance/types-of-small-business-insurance

Wolstenholm, Jack. “How Much Does Disability Insurance Cost per Month?” Breeze, 8 June 2019, https://www.meetbreeze.com/disability-insurance/how-much-does-disability-insurance-cost/.

Stephanie Wilson


February 17, 2022

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