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I own a small private business. If I am unable to work, how do I ensure my business does not suffer financially?

One option that you might consider is buying business overhead insurance. This type of insurance provides funds to pay for the rent, staff and utilities if you become disabled. This type of insurance, which usually has a fifteen to thirty day waiting period and an eighteen to twenty-four month benefit period, provides funds to the insurer to pay their business expenses. This insurance also provides business owners with time to determine whether they will return to work or sell their business once the benefits run out.

Another way to protect your business is to buy key person insurance. Key business insurance recognizes that there is usually at least one senior employee who contributes significantly to the profitability of the business. This type of life or disability insurance is unique in that it is taken out by a business (not an individual) on the life of that key individual. That means the business is the policy’s beneficiary and in the event of the key person’s death or disability, this type of policy provides funds to search for a replacement and to reduce the impact of reduced profits. If you have a partner you should have a shareholders’ agreement with your partner to ensure the orderly transfer of shares from one shareholder to the other in the case of premature death, disability, retirement or a disagreement between the partners. Under a shareholders agreement, the surviving partner would be required to purchase the shares of the decreased at a specified price. In order to raise the money for such a buy out you may want to apply what is called a criss-cross ownership approach, whereby each partner holds a policy on the other partner’s life and the policy holder is also the beneficiary of the policy. Under such circumstances, one partner would receive the money directly from the insurer if the other partner becomes disabled or dies. The partner receiving the funds would then have funds to purchase the shares of the disable or decreased partner. For more detailed information on the above outlined policies please consult your insurance agent.