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  • Writer's picturejimmy ting

Are you a Small Business Owner? Here is Why you Need Life Insurance and Disability Insurance

When you decided to go into business for yourself, your first thoughts were most likely excited ideas of what could go right: more freedom, happy customers, increased earning potential. However, your later thoughts may have turned to what could go wrong as well. That’s where insurance steps in to help.

As a small business owner, entrepreneur, influencer or freelancer, you are your business, and your business depends entirely on you. Fortunately, insurance is there for you when things take an unexpected turn. You’ve probably thought about general liability insurance or other business insurance, but what about life and disability insurance?

  • Specifically, life insurance provides peace of mind for your business, and all those who depend on you—family, employees and customers—in the event of your death.

  • Similarly, disability insurance provides income for you in the event that you are unable to work due to illness or injury.

Why Entrepreneurs Need Life Insurance

Small business owners are used to doing it all and managing a very busy schedule. However, every once in a while, it is necessary to step out of your “doing” role and into your strategic planning role. While it’s never at the top of anyone’s to-do list, that strategic thinking should include preparing for worst case scenarios.

Entrepreneurs and freelancers are the force behind their companies. They fuel growth, take care of customers and inspire employees or partners. So, what happens to their companies, and everyone they support, if a key (or only) person dies?

One sound investment that can help address a key person’s death is life insurance. Life insurance can make sure the company has the resources to continue to take care of business, even if you are gone.

In this case, there are a few ways you can use life insurance to support your small business. Here are a few key policies to consider.


Key Person Insurance is a life insurance policy that pays out when a key owner/employee dies. The business itself purchases the policy and all the proceeds from the death benefit are also paid directly to the business.

The main benefit of Key Person Insurance is that the cash the policy provides can be a bridge to the next necessary step in the business’ life—whether that is finding a key person replacement, selling the business or moving on to other projects.


In the case that your business has more than one owner, then a Buy/Sell Agreement is another option to mitigate the risk of death of a key partner. Entrepreneurs can use life insurance to fund a Buy/Sell agreement. The cash benefit then allows the other owners to buy out the deceased partner’s interest from their remaining family members. If you are a business partner with a family that cannot, or does not want to, run your part of the business in the event of your death, then Buy/Sell funding is a good option.


Additionally, even if you do not have partners, you should consider a basic life insurance policy to cover your debts and responsibilities. If you die, your family would have financial relief from a cash benefit that could help close down or sell off your business if they don’t want to continue your work.

Disability Insurance Considerations for Entrepreneurs

Another catastrophic consideration for entrepreneurs is, what if you don’t die, but instead, are disabled? You rely on your hard work inside your business to pay your bills. Accordingly, small business owners like you deserve the protection of disability insurance. In the event of injury or illness, it can provide at least a portion of your expected income assuming you cannot work anymore.

Disability Insurance for Employees vs. Entrepreneurs

According to the Social Security Administration, one in four people will become disabled in their working life. With these odds, disability insurance becomes a necessary protection for all workers—whether you are an employee or entrepreneur.


Often, corporations provide their employees with long-term disability insurance, up to a certain percentage (usually around 66% of your usual paycheck). Then, their employees can buy more disability insurance to cover even more. Additionally, corporations also can provide or subsidize short-term disability policies (that cover around three months) for their employees.


On the other hand, small business owners, especially solopreneurs, artisans and freelancers, have to procure and pay for all of their own disability insurance. With no corporate subsidies, many of these entrepreneurs think disability insurance would be too expensive. However, there are different price points available for different disability policies, and a good insurance agent will be able to help you find one that fits your needs and price considerations.

If you are a small business owner who does not have disability insurance, or thinks you may not have enough disability insurance, then your first step is to discover how much (or how much more) you need.

Conclusions and Action Steps

According to the Small Business Administration (SBA), over 99% of America’s firms are small businesses. Clearly, our country’s entrepreneurs and small business owners are vital to our economy. That is why we need to do everything we can to protect and support them, and life and disability insurance help us do just that.

If you are a freelancer, influencer or business owner, you owe it to yourself to protect everything you are working so hard to create.

For more information about Life Insurance and Disability Insurance call JCT Insurance Agency at (626)354-2000 or email

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