Quick answer: Disability insurance pays a monthly cash benefit — typically 60–70% of your gross income — if an illness or injury prevents you from working. Benefits from a personally owned and premium-paid policy are received income-tax-free. The odds of a disability lasting 90 days or more before age 65 are significantly higher than dying — roughly 1 in 4 workers will experience a disability lasting more than 90 days during their career, making this the most under-owned protection for business owners.
Policy Terms That Matter Most
The definition of disability is the single most important feature. "Own-occupation" means you're disabled if you can't perform the specific duties of your current occupation — a surgeon who loses hand function collects full benefits even if they could work as a medical consultant. "Any-occupation" only pays if you can't work in any job — a much harder standard to meet. Most individual DI policies for business owners use own-occupation definitions, especially for professional occupations. Other critical terms include the elimination period (how long you must be disabled before benefits start — typically 60 or 90 days), benefit period (to age 65 or lifetime), and inflation protection riders.
Coverage Amounts and What You Can Actually Insure
Carriers will typically insure up to 60–70% of your pre-disability earned income, not including passive income. For a business owner earning $200,000, that's a monthly benefit of roughly $10,000–$11,700. Many carriers coordinate benefits — if you have group DI coverage, individual coverage is reduced accordingly. Business owners often need both personal DI (replaces personal income) and business overhead expense insurance (covers fixed business costs). If a buyout agreement exists, a separate disability buyout policy funds the purchase of your ownership interest if you're permanently disabled. Coverage is harder to get as you age or if you have existing health conditions — the best time to buy is when you're healthy and younger.
What Disability Insurance Does Not Cover
Most individual policies exclude disabilities caused by pre-existing conditions (for a look-back period), self-inflicted injuries, and active military service. Mental health and substance abuse claims may have a 24-month benefit limit. Short-term disabilities (under 60–90 days) are not covered — your emergency fund handles these. Business revenue loss is not covered by personal DI; that requires BOE insurance. Work with an independent disability insurance specialist who can access multiple carriers (Principal, Guardian, Ohio National, Mass Mutual) to find own-occupation coverage at the best rate for your occupation class.
Questions About Your Specific Situation?
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