COVID Forces Business Owners To Ask Tough Health Questions

By Kenny Russell

As businesses have had to adapt their operations due to the COVID-19 pandemic, employee duties also may have changed. Some of business owners’ prior concerns are still there, of course, but possibly heightened or altered. Those concerns might include questions about what would happen if one or more of the owners were affected by an illness or accident.

Asking The Questions

What if a business partner became diagnosed with COVID-19?

• Does the business have plans to ensure it is able to operate efficiently?
• What if a business partner experienced complications during recovery?
• What if the partner couldn’t return for an extended period of time?
• Does the business have contingency plans in place addressing potential scenarios?

Putting Business Insurance Products Under The Microscope

Until recently, it was difficult to imagine a global pandemic occurring. COVID-19 has brought to the forefront how important it is for business owners to look at what protection products they have in place for different situations.

How would a business owner who is diagnosed with different medical conditions affect what happens to the business? If the owner were unable to work for two weeks, would that have a major impact? More than likely, no.

However, what if the owner were unable to work for nine months, 17 months or permanently? Unlike COVID-19, the risks related to heart attack, stroke, cancer and other medical conditions are well known. Any of these conditions could cause someone to be unable to work for an extended period of time.

Would any of the above situations impact the business' ability to pay its employees, or pay the mortgage or rent on the business? Would the buy-sell agreement cause the disabled partner to be bought out of the company (as most buy-sell agreements have language to trigger for a disability)? What would be the impact on the business?

These questions are important to consider since there is a 51% chance of a three-owner firm having one of its business owners out for at least three months or more, according to the 2013 Individual Disability Income Valuation Table without Margins, — and this was before thinking about the possibility of COVID-19.

Relaying The Good News

The good news is that there are products designed to help with some of the concerns that could significantly affect the business. It’s vital for financial professionals to talk with their business-owner clients about the right product solutions that address their concerns. Some product options include:

• Disability buy out to fund the buy-sell agreement upon triggering for a disability.
• Business overhead expense to reimburse for qualifying fixed, ongoing expenses of the business for which the disabled owner is responsible.
• Business loan protection to reimburse the monthly payments on outstanding business loans.
• Key person insurance to provide funds to the business to help replace the disabled key person or partner.

Your clients are four times more likely to become disabled than to die during the working years, according to a Million Dollar Round Table list of Top 10 disability insurance facts. Financial professionals more frequently discuss life insurance key person or buy-sell with their business-owner clients. In light of the current pandemic, complementary disability insurance products should be part of that discussion.

Kenny Russell is director, disability sales, for the Disability Solution Center at Crump Life Insurance Services. Kenny may be contacted at [email protected].

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