Written By Dennis Hornsby
Updated on May 6, 2025
Small business owners are often called the backbone of the American economy as well as the American dream. Yet these enterprises are also extremely difficult to get off the ground — 20% fail in the first year, and 50% will close within five years.
Not all closures stem from flawed business plans. The health of the owner is paramount to a small business succeeding. How can entrepreneurs protect themselves?
Understanding disability insurance for small business owners
Disability insurance pays you a replacement salary when you can't work due to a disability, such as illness or injury.
Now, this isn’t just if you’re disabled from all work completely, like with Social Security Disability Insurance. Disability insurance policies can include “own occupation” coverage that pays if you can’t perform your specific job. This is crucial for professionals like dentists who want to start their own practices — even a minor hand or wrist injury could bring their business to a standstill.
Two major types of disability insurance: Short-term vs. long-term policies
There are two major kinds of disability insurance: short-term and long-term. Both policies do the same thing. The main difference is the length of the benefit period, which is how long these policies can pay you in the event of a disability. After satisfying the waiting period:
- Short-term disability insurance typically pays out for up to a year or two if you are disabled. This gives you time to recover and get back to work, or if needed, sell your business at a fair market rate. But this type of protection alone would not be adequate in the event of a permanent disability.
- Long-term disability insurance can pay benefits up to age 65, 67 or 70 if you want it to, which is vital protection if you never recover from a disability. This is what most working professionals should have. It’s much harder to survive decades without income than just one year. Some policies even help fund retirement accounts while you're disabled, an important factor since contributions to a pretax retirement account must be earned income. So, if you are disabled, you are normally unable to contribute.
Both types of disability insurance are also frequently provided by employers to their employees as part of their benefits packages. If you’re a very small business, you might not need to provide it yet, but it might be worth keeping in mind for the future.
Get the best price on own occupation disability insurance
SLP Insurance will find you the best price even if it's not with us. Fill out the form below to get discounts of up to 30%.
Choosing the right disability insurance company
The best company depends on your occupation and when you shop for coverage. Five major players make up the disability insurance market — it’s what brokers call the “Big 5” (Guardian, MassMutual, Principal, The Standard and Ameritas).
Each company has its own grading system for occupational risk, which affects your premiums. All offer strong coverage, but an independent broker can work with all of them to find your best rates. For example, if your business has multiple employees, you could get a discount with certain carriers if at least two employees buy a policy through that company.
The lesser-known small business insurance that is critical
Business overhead expense policies are not as well-known as disability insurance, but for small business owners, they are vital. These policies cover ongoing business costs during your disability, including employee salaries, rent, utilities and loan payments.
A real-world scenario
Consider this example: You own a small dental practice. You’re the only dentist, and you have four hygienists and two receptionists on payroll. If you develop chronic back pain that leads to back surgery and a lengthy recovery process, you might not be able to work for a year. Without a business overhead expense policy, your entire well-trained staff could move on to other work — they likely can’t survive a year waiting for your return with no salary.
How quickly could you hire and train an entirely new staff? And how would you handle your $11,000 monthly practice loan?
In the worst-case scenario, you’d have to sell your practice. And if you’re forced to sell, you’re very unlikely to get a fair market rate.
This is the whole idea behind business overhead expense policies. Unlike personal disability insurance that replaces your income, business overhead expense coverage specifically maintains your business operations.
Dual protection strategy to protect the future of your business
Business overhead expense policies provide essential protection when health issues strike. For short disabilities, they keep your business intact while you recover. If it’s a long-lasting disability, then it gives you time to search for buyers and get fair market value for your business. Pair that with a long-term disability policy for yourself, and you’ll stay financially secure even if you can’t ever return to work.
Compare disability insurance quotes and save
SLP Insurance will find you the best price on own occupation coverage, even if it's not with us. Fill out the form below for a quote with up to 30% discounts.
