Profit Magazine: The Wealthy Entrepreneur
10 essential strategies for every business owner who wants to be rich and stay rich
Profit Magazine in their March edition published a handy checklist of wealth-management moves for entrepreneurs, explaining why, when and how to make each one. LSM insurance was included!
By Julie Cazzin, February 16, 2011 in ProfitGuide.com
Tip #7: Assume you’ll be disabled this year
According to Statistics Canada, one in eight working Canadians will become disabled for more than three months, and half of these people will be disabled for more than three years. Those sobering statistics should push disability insurance to the top of your list of insurance needs.
Protect yourself and your family from disability-related income loss by making sure your policy has a benefit period extending to age 65 and will replace all of your monthly after-tax income in the event of a claim. The latter depends not only on the premiums paid but also on whether tax deductions were claimed against them. “The rule is: if you pay the premium with after-tax dollars, the monthly benefit is tax-free,” experts from LSM Insurance said. “In most instances, people don’t deduct the premiums,” they added.
Assume you’ll be disabled this year
from Profit Magazine. Enjoy the whole The Wealthy Entrepreneur article!
You should also have a good term-to-100 life-insurance policy that will cover all your family’s annual expenses and personal debt if you die unexpectedly. As well, your company should buy life, disability and other forms of insurance for you and other key people in the business. The firm will be the policy’s beneficiary; in the event of death or disability, the policy will make a payment to the company to compensate for the setback of losing a key executive.
The standard rule of thumb is to buy five to 10 times the key person’s salary. For a 45-year-old male non-smoker making $200,000 a year, the premiums will cost about $2,000 to $4,000 annually.
In all cases, review your insurance coverage annually to ensure that it’s keeping pace with your changing financial situation.