From a solutions standpoint, we are living in an abundant time in our industry. There are countless life insurance products at our disposal to help our business clients achieve their financial and life goals. However, the complexity of the need can often exceed the intention of the tool. In order to truly meet the demands of our clients, we must sharpen our skills and consider every possibility, every opportunity, that these tools afford us in meeting those demands. Not unlike the essential items in a survival ‘get out of town’ or ‘go bag’, we must rely on our expertise and our ability to get the most out of each of the products available to us in the marketplace. For our clients with sophisticated needs, we need the ability to turn an insurance product into a multi-tool.
Disability Insurance: A Swiss Army Knife for Business Security and Succession
Disability insurance is a perfect example of a product with multiple applications to meet the many potential needs your business client may have. In addition to a disability policy’s native use as a stop-gap for lost wages incurred when an employee is no longer able to perform their work tasks, it can also be utilized to secure money for the company should they lose a key player.
Business Owners Can Protect Their Chief Asset With Key Man Disability
Since many business owners exclude themselves from workers’ compensation at their own company, the company is left vulnerable should something happen that prevents them from performing their tasks.
In this case, we could utilize a key-man disability policy or overhead coverage on the owners. Should something happen to one of the owners, the money from the policy goes into the business to help them offset the loss of their key player.
This way we are allowed to protect the company, facilitate a temporary continuation plan for your client’s business and keep the company afloat in their absence.
Salary Continuation Disability Insurance: Cutting the Risk for Business
When an employee becomes disabled, a salary continuation plan can help keep them financially sound for the period that they are unable to work. However, this places the company at a loss while they pay for employees who are not contributing to the bottom line in a meaningful way.
Well, if you know where to look, there’s a tool for that, too!
Salary continuation disability insurance acts as the tiny scissors in your multi-tool, cutting away risk for the business should one of their salary-continued employees becomes disabled. Saving the company money while still caring for the disabled employee ensures that a company offering a competitive, peace-of-mind benefit to their valued employees doesn’t suffer as much in their absence.
Stress Testing 10 or More Policies Reveals the Best Solution
As with plan, different carriers are able to provide different levels of protection for the company in these circumstances. Knowing where to look and how to use these policies is key to finding the perfect fit for your client. Where some policies strictly limit the amount of compensation a company may receive (oftentimes less than the actual amount of salary the company is on the hook for) others have ways to indemnify the entire salary against disability. This is why Mettle places profound importance on stress testing multiple policies from multiple carriers in order to find the sweet spot in terms of budget and overall protection.
Disability Insurance as a Loan Indemnification Tool
Typically, when a business owner wants to protect their debts, monthly charges such as rent and utilities, and other charges associated with their business, we might steer them towards a BOE or business overhead expense disability insurance policy. While such a policy would grant them suitable protection to keep the lights on, what would happen if that business owner had an outstanding business loan from a bank with monthly principal and interest payments?
Consider this: An young mechanic is purchasing an auto repair shop from a retiring owner. In order to achieve this dream, they apply for a loan from a major bank. As part of the closing requirements, the bank needs them to acquire a disability policy that directs the benefits towards the loan repayment schedule.
In this case, a traditional BOE would not necessarily apply to the loan repayment. In many cases, disability benefits previously assigned to cover other financial risks should be left in place so as not to expose the company to risk. Once again, if you know where to look, there is a disability solution for this as well.
There are some carriers that offer loan indemnification disability insurance for precisely this scenario. In this case, you would be able to indemnify the entire loan, including principal and interest payments, and structure it favorably to cover the entire payment schedule.
Mettle Gets the Most Out of Each Product to Create Flexibility and Improved Client Outcomes
At Mettle, we place a premium on stress testing multiple products to understand the right approach for every client’s unique needs. While a certain carrier and policy may seem like a perfect fit at first, it is imperative to play out as many possible scenarios in order to truly comprehend how the product will perform under varying future circumstances.
- What happens if you reduce the death benefit?
- What happens if you miss a premium in year 11?
- Which disability product allows for a company to retain the most cash?
The answers to questions like these and many others when comparing 10 different life products is the only way to get the right policy in place for each client.
Being able to take each product and find the flexibility and options available to best serve your clients is a skill set that we have keenly developed over the years. Our chief aim is to make certain that the plans we design for your clients are not just perfect for the here and now but for the evolving future of their needs and goals. Let us know how we can help you make the most out of any of the tools available to you today. We look forward to the conversation.