Business Disability Income Insurance

Pre-presentation Thinking

“Entrepreneur, one who organizes and assumes the risk of a business or enterprise.”
— Webster

Selling the Entrepreneur

If the people of the world were divided into entrepreneurial and non-entrepreneurial classes, the differentiator between the two would be the tolerance for and the aversion to risk. Webster uses the word risk as a key word in the definition of an entrepreneur.

We recognize that entrepreneurs are not always organizers of a business. They may buy or buy into a business, or they may inherit a business interest. The willingness to accept risk in an ongoing firm tabs this person as a person willing to accept risk in it’s various forms. The entrepreneur does not relate risk acceptance to gambling for such a person feels absolutely certain of his ability to succeed and to stay in a success mode. Failure is a never a thought.

To get to the starting line the entrepreneur checks off the ingredients for success: courage, stamina, knowledge and financial strength. If there are areas of uncertainty partners or associates who possess strengths in the entrepreneur’s areas of weakness are recruited to join him and create a sound team.

Determined and confident, the entrepreneur manifests not just an attitude of success, but of incredible success and failure is not an option. Strong, proud, capable of climbing any mountain and solving every challenge, the entrepreneur becomes a victim of the Tarzan Syndrome.

Being healthy and born of sturdy stock, and an avowed careful driver, the entrepreneur barely admits to mortality and morbidity is dismissed as something that can only happen to other people. The entrepreneur being a risk taker possessed with the Tarzan Syndrome can become an obstacle in selling the entrepreneur on securing adequate kinds and adequate amounts of disability insurance. The sales task is to bring to Tarzan that if he is impervious to all accidents and all sicknesses, he may feel the negative financial effects to the firm by having a partner struck down.

The Scene to be Painted

Mr. Tarzan, imagine that you are riding to a meeting with your partner, Mr. Wimp. An oncoming car crosses over the centerline. There is a head-on collision. You escape without serious injury. Mr. Wimp, badly hurt, is taken to a hospital in an ambulance.

At the hospital you sit vigilantly with Mr. Wimp’s family, hoping and praying he will live. You offer reassurance to the family that Mr. Wimp is tough and he will survive, shrouding your own misgivings for you recognize now that his total recovery is the key to that family’s future.

Months pass. Mr. Wimp remains in the hospital in traction and faces unknown surgical procedures on his back, which was broken in the car crash. Mrs. Wimp appears at the foot of her husband’s “bed of pain” with tears in her eyes and a look of anguish on her face. Mr. Wimp, though sedated, realizes her deep concern. She replies that their cash savings have been consumed and she still has bills to pay. “Why” Mr. Wimp asks,” have our savings been spent?”

“Because,” she replies, “Mr. Tarzan has not provided a paycheck since the accident. He said the firm cannot afford to pay a non-worker and that Workers’ Compensation and Short Term Group Disability benefits are all we can expect.”

Mr. Wimp becomes enraged and directs his wife to go to you Mr. Tarzan and advise you that he, Mr. Wimp, is a principal of the firm and demands equal pay to yours, and he demands it now!

Mr. Wimp’s voice cannot be quieted as long as he lives. Although he is productively dead, it is illegal to bury him. When the business was started he, like you, Mr. Tarzan, felt very bullish and believed in taking only modest compensation and reinvesting profits in the business. Today his attitude is the exact opposite. He is a frightened and timid soul who wants more compensation and loans from the firm to help resolve his personal financial problems.

Your firm continues to weaken under its undermanned state and it’s value is falling because of Mr. Wimps frightened attitudes and his personal financial demands.

Your owners, previously excellent team players who were always on the same page, become hostile to one another. Your families no longer speak. Suspicion replaces trust.What can be done? Possibilities considered are to try to sell the distressed firm, or to reorganize the firm by taking in new controlling interests, who may be hostile to the present owners. There is no satisfactory solution.

The Best Solution: Agreements planned in advance and funded with insurance

By agreement in advance, affordable and budgetable insurance plans can be provided to fund the terms of the agreement.

  1. Salary Continuation for the disabled member of the firm.
  2. Key Person indemnification to the firm to offset the losses sustained due to loss of the disabled member’s productivity.
  3. Funds to hire a replacement for the disabled member.
  4. After 12 months of disability the disabled member would be obligated to sell, and the firm would be obligated to buy out the disabled members percentage of ownership of the firm at the agreed upon price, or on the formula agreed upon to arrive at the price.

The disabled member’s income is sustained, the firm has remained solvent and the voice of the disabled person has been quieted in a merciful and friendly way.