disability insurance is generally used to protect the income of an individual in the event of a prolonged period of disability but the business employing that individual is an entity onto itself and the income of the business May equally need protecting should it be interrupted due to the disability of an employee as discussed in previous sessions uh there are several risks to business owners and uh we have looked at the concepts of a business overhead expense policy business loan protection disability insurance uh we also talked about the use of a buy sell agreement that is appropriately funded with disability bu insurance and so in this session we're going to look at the impact of the loss of a key employee due to disability on a business now as you can understand uh there are usually one or two key employees that are critical to the success of any small business and the disab ability of one of these individuals or the death or even you know losses because someone suffered a critical illness uh these risks can impair the business income and uh you know the loss of that employee uh can result in a decline in productivity in the business uh you could have a sales decline especially if that individual is critical in the sales role uh and also you may have incurred as a business you may have to incur recruiting costs uh and training cost if you have to get either a temporary replacement or if the individual is not going to recover fully you may have to in fact get a full-time replacement and so these are significant risks to a business and keyers disability insurance is designed to protect the business against any potential losses in income so be remember the key person disability insurance is not for that individual key person it's not for that individual key person and their family key ke person disability insurance is in fact for the business and these policies are owned by the business and the beneficiary is also the business so if that key person becomes disabled they're going to have to have their own individual disability insurance coverage to cover their own personal situation so the key person disability insurance product we're talking about here is owned by the business uh the business is the beneficiary and the proceeds are used to cover potential losses the business might incur as a result of the disability of the key person in that business so uh couple of features uh policy benefits and premiums uh usually obviously the life insured is going to be going to have to be actually a full-time employee so most key people uh in the business are going to be full-time employees the occupation definition of disability is the regular occupation definition that you'll find in uh many individual disability income plans so it's not the uh own occupation but it's regular occupation now in these plans we can also add Riders just as we can add them to customize individual plans and uh you know PRI primarily we have on these types of programs um waiver of premium and recurring disability are some writers that are added to this uh program now the waiver of premium is is really only going to be if in fact we have an incorpor an unincorporated business should be a proprietorship or a partnership where the payer of the premium is uh an individual could be the proprietor on their own life uh sorry on the life of another employee key employee or it could be one of the business owners owning that policy on the life of that key employee so so uh the waiver of premium is going to be waving the premium in the event the pay of the policy becomes disabled uh if the life that's insured becomes disabled then obviously the policy is going to be in a claim position so you can add a couple of different types of riders uh the amount of uh coverage that is possible is that it's limited to 100% of that key person person's salary and usually there's a maximum of in most cases $115,000 per month of salary that these are the maximums that insurance companies the maximum risk the insurance company would be willing to take on so 100% of the salary to a maximum of 15,000 per month uh usually choices of 30 to a 90-day waiting period on these types of plans and the benefit period usually extends for up to 12 months I think uh the reason this probably doesn't go any longer is that it's likely that you know if your key person is still disabled after that period of time uh you probably are going to be in a position as a business of having to actually replace that person with a full-time uh uh individual so these benefit periods tend to be uh uh around 12 months or one year uh the premiums for this are not tax deductible to the business and so the business will pay the premium on the policy on the life of this key person and as a result of that if a claim uh event uh comes to pass in fact if you have a claim uh the benefits coming from the policy are going to be taxfree to the business again because they were unable to get a tax deduction for the premium so uh this is a quick and short review of keyers disability insurance I will once again refer you to the summary under table 5.1 in your textbook which gives a good overview of the risks that businesses face uh in the event of a disability and the types of of policies that are available in the marketplace to be solutions to that problem