Beware of sickness, injury

Businesses are an integral part of our community.

They generate the goods and services we need, create the jobs that put food on the table and pay a significant share of the income, property and consumption taxes that provide the services we often take for granted.

That's a pretty heavy burden to bear - especially if the business owner gets seriously sick or hurt and can't show up in the morning to turn on the lights!

I know that risk well, having survived a serious cycling accident years ago only because I was wearing my helmet.

Although the statistics will depend on gender, occupation and lifestyle, let's just say there's a one in three chance that you'll have a long term disability lasting three months or more before age 65.

Given the City of Richmond shows 9,974 business licenses in Richmond, as of last April, 3,325 of them will be impacted by a long term disability before the age of 65.

These businesses are probably paying significant overhead expenses, including leases, salaries, telephones, insurance, franchise fees, office expenses, etc.

Most of these bills remain payable when the business owner is disabled and the banks aren't very inclined to lend money when the boss is out of commission.

I'm not trying to be a harbinger of doom here - just a realist.

We have to prepare for these risks in the same way we must assure property and inventory are covered against theft, fire, water damage or other perils.

Business owners often mistakenly think this risk is covered by their umbrella property and casualty insurance. It's not.

It's also not covered by personal disability policies or the group long term disability coverage offered under their employee benefits plan.

Those plans will pay out a percentage of the business owner's income, but no reimbursement of overhead expenses.

What is required is a Business Overhead Protection policy.

Simply put, this coverage reimburses the business for customary overhead expenses if the owner cannot perform the important duties of his or her regular occupation due to illness or injury.

You can choose a waiting period of 30 or 90 days before benefits kick in.

You can also choose benefit periods that last between 12 and 24 months.

The benefit period is clearly not longterm and that will be reflected in the relatively low cost of these plans.

Benefits from this coverage will ease financial pressure on the business when the owner needs to focus on recovery.

If the disability looks like it will prevent a return to work, the business will be able to buy time to establish a succession plan or find a buyer.

There's a lot of pressure riding on the business owner.

With proper planning, there's no need to turn a long term disability into a disaster.

The opinions expressed are those of Richard Vetter, BA, CFP, CLU, ChFC. Richard is a certified financial planner and owner of WealthSmart Financial Group in Richmond (www.wealthsmart.ca).