Principal Life Insurance Company Protect Business Owners Against Disability

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Principal Life Insurance CompanyProtect Business
Owners Against Disabilitys Triple Threat
Presented By Don Schamay, CFP Disability Income
Regional Vice President Principal Life Insurance
Company
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Disabilitys triple threat

• Business owners face a triple threat
• Keeping a roof over their head
• Keeping their business door open
• Keeping their business investment intact

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Clients insure their home and their car, but what
about their income?
Keeping a roof over their head
Income 4,216,000
Home 294,3000
Car 31,501
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Keeping a roof over their head

• What would happen to their income?
• How would your client maintain their lifestyle?
• Where would the money come from to pay for bills?
• What happens to their retirement savings and
  other financial goals?
• Do your client have Group Long-Term Disability
  insurance in place? Are the benefits taxable?

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Keeping a roof over their head
Can their employees live on 42 of their income?
Few clients could survive a 40 or greater loss
of income.
Chart based on 5,000 gross monthly income
(60,000 annually), with 60 Group Long Term
Disability program, assuming a 30 tax bracket
for Federal, State and FICA.
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Keeping their business door open

• If your clients are unable to work, would their
  business be able to stay open?
• How would business expenses get paid (rent,
  salaries, utilities, etc....)?
• Would they have to turn customers away?
• What would happen to their business if a key
  employee became totally disabled?

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Keeping their business door open
Chances of a disability lasting 12 months or longer (before age 65) Chances of a disability lasting 12 months or longer (before age 65) Chances of a disability lasting 12 months or longer (before age 65) Chances of a disability lasting 12 months or longer (before age 65)
Age 2 Owners 3 Owners 4 Owners
27 26.3 36.7 45.7
37 24.5 34.5 43.1
47 20.7 29.4 37.1
57 21.1 17.6 22.8
Source Commissioners Individual Disability
Table B Equally Weighted 90 day Elimination
Period
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Keeping their business door open

• Possible income sources
• Business partner
• Creditors
• Liquidate assets
• Personal savings
• Sell the business

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Keeping their business door open

• With Overhead Expense insurance
• Fixed business expenses are reimbursed
• your client dont rely on creditors
• their savings and investment plans arent
  jeopardized
• Avoid foreclosure or liquidation
• Premiums are tax-deductible

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Keeping their business door open
With the Business Loan Protection rider
Did you know?
The U.S. had six million small employers in 2005, representing over 99 percent of the nations employers.1 In 2007, outstanding small business loans (under 1 million) were valued at over 684 billion for more than 24 million loans.1

• Protect owners of small- to medium-sized
  businesses who have taken out loans to grow their
  business
• Reimburses the owner for covered business-related
  loan obligation during his/her total disability.

1SBA Office of Advocacy, 2008
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Keeping their business door open

• With Key Person Replacement insurance
• Protects the business from the loss of a key
  employee
• Business pays for and is the owner of the policy
• Any benefits received can be used at their
  discretion, but cannot be assigned to the key
  employee
• Helps demonstrate financial stability to
  creditors, shareholders and other stakeholders

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Keeping their business investment intact
If your clients or one of their partners is
disabled

• Would they want to sell their share of the
  business?
• Would they want to buy out their partner?
• How would the price be determined?
• Where would the money come from?
• Is it guaranteed to be there when its needed?

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Keeping their business investment intact

• The disabled partner may
• Become a drain on income while not contributing
  to the business
• Have different priorities for the business income
  and profits and may not want to reinvest profits
• Decide to let spouse or relative take over their
  role in the business

• The healthy partner may not
• Be able to pay the disabled partner an income and
  maintain the business
• Have funds to buy the disabled partner out
• Want to share business decisions with the
  disabled partners family

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Keeping their business investment intact
Establishing a buy-sell agreement

• Disabled owner advantages
• Assures a definite price and buyer
• Financial future is no longer contingent on the
  businesss success

• Healthy owner(s) advantages
• Avoids negotiation of price
• Assures complete and orderly transfer of
  ownership
• Retains control of the business
• Provides continuity and credibility for customers
  and creditors

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Keeping their business investment intact

• Funding alternatives
• Current cash flow
• Establish a sinking fund
• Borrow the funds
• Disability Buy-Out insurance

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Keeping their business investment intact

• Disability Buy-Out Insurance
• A written agreement that specifies when and for
  how much the buy-out will take place, and...
• is funded with the right amount of Disability
  Buy-Out insurance.

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Keeping their business investment intact

• What we will provide to your client
• Assessment of their current program
• Design options
• Cost Benefit Analysis
• Tax consequences
• Implementation steps

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Get peace of mind at a multi-life discount

• OE DI DI 20 discount
• A business owner purchases OE and employees
  purchase their own DI 20 discount!
• DBO DBO KPR 20 discount
• Two business owners purchase DBO policies and pay
  premiums for an employees KPR policy 20
  discount!
• DI DI DI 20 discount
• Three individuals with a common employer purchase
  DI policies 20 discount!

OE Overhead Expense DBO Disability Buy-Out
DI Individual Disability Income KPR Key
Person Replacement
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For more information

• Please contact their local Plus Group office for
  more information.  Go to www.plusgroupus.com and
  click on the agency locator map to find an office
  near your client or call 800/831-1018.

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While this communication may be used to promote
or market a transaction or an idea that is
discussed in the publication, it is intended to
provide general information about the subject
matter covered and is provided with the
understanding that The Principal is not rendering
legal, accounting, or tax advice. It is not a
marketed opinion and may not be used to avoid
penalties under the Internal Revenue Code. your
client should consult with appropriate counsel or
other advisors on all matters pertaining to
legal, tax, or accounting obligations and
requirements. Insurance issued by Principal
Life Insurance Company a member of the Principal
Financial Group, Des Moines, IA 50392,
www.principal.com