Most people who have thought about it own Disability Income Insurance. That will protect your personal spending while you are unable to earn a living. But, what about the business expenses that will carry on even while you are unable to attend?
Things like the lease, the bank loan principal and interest, the support staff, the heat and hydro, the association fees, the insurance, the municipal taxes and many more fixed expenses. The telephone bill seldom can go away because you would like to keep the number. The staff stays unless you want to train a new one when you get back. The bank and the leasing company probably expect to get paid too.
Hiring temporary help might not leave enough margin to cover all the expenses, so you have implicitly selected other options.
After the fact, you have choices.
- Kill off all the expenses quickly. But that does not really work because in the short run you will not know for sure if you can come back to work.
- Erode you savings. Then what?
- Sell. At a good price? Right.
- Hire people to do what you do. Difficult, more likely impossible. Will you be up to finding them? How to terminate them when you come back?
Before the fact you have other choices.
- Build depth so employees can run the business without you.
- Have emergency succession arrangements so some other business can cover you for a while.
- Own appropriate insurance.
Of the seven choices above, owning Office Overhead Expense insurance is by far the easiest to execute. Better yet it does not get in the way of any of the other six should they develop over time.
It is relatively inexpensive and for self employed persons, it should be part of any well-constructed disability insurance plan. This insurance protects your savings and the way you have constructed your business. Both are hard to replace.
Ask your insurance adviser about it.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.