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Triple Threat to Biz Owners

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Triple Threat to Biz Owners

  1. 1. Principal Life Insurance CompanyProtect Yourself AgainstDisability’s Triple Threat
  2. 2. While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it isintended 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. You should consult withappropriate 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
  3. 3. Disability’s Triple ThreatBusiness owners face a triple threat• Keeping a roof over your head• Keeping your business’ door open• Keeping your business investment intact
  4. 4. Keeping a roof over your head – income protection Individual Disability Income insurance
  5. 5. Keeping a roof over your headYou insure your home and your car, but what about your income? Income $4,216,000 Home $294,3000 Car $31,501
  6. 6. Keeping a roof over your head• What would happen to your income?• How would you maintain your lifestyle?• Where would the money come from to pay for bills?• What happens to your retirement savings and other financial goals?• Do you have Group Long-Term Disability insurance in place? Are the benefits taxable?
  7. 7. Can your employees live on 42% of their Keeping aincome? your head roof over Few could live on 42% of their income.Chart based on $5,000 gross monthly income ($60,000 annually), with60% Group Long Term Disability program, assuming a 30% tax bracketfor Federal, State and FICA.
  8. 8. Keeping a roof over your headIndividual Disability Income (DI) insurancePersonal income protection so you can:• Provide for your family if you become too sick or hurt to work• Maintain your lifestyle without draining savings or business profits• Protect a higher level of your income (in the event you have Group LTD insurance)
  9. 9. Keeping your business’ door open – risk management Overhead Expense Insurance
  10. 10. Keeping your business’ door open• If you are unable to work, would your business be able to keep the doors open?• How would business expenses get paid (rent, salaries, utilities, etc....)?• Would you have to turn clients away?
  11. 11. Keeping your business’ door open 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: Commissioner’s Individual Disability Table B “EquallyWeighted 90 day Elimination Period”
  12. 12. Keeping your business’ door openPossible income sources• Business partner• Creditors• Liquidate assets• Personal savings• Sell the business
  13. 13. Keeping your business’ door openWith Overhead Expense insurance:• Fixed business expenses are reimbursed• You don’t rely on creditors• Your savings and investment plans aren’t jeopardized• Avoid foreclosure or liquidation• Premiums are tax-deductible
  14. 14. Keeping your business investment intact – succession planning Disability Buy-Out Insurance
  15. 15. Keeping your business investment intactIf you or one of your partners is disabled …• Would you want to sell your share of the business?• Would you want to buy out your partner?• How would the price be determined?• Where would the money come from?• Is it guaranteed to be there when it’s needed?
  16. 16. Keeping your business investment intactThe disabled partner may: The healthy partner may not:• Become a drain on income • Be able to pay the disabled while not contributing to the partner an income and business maintain the business• Have different priorities for • Have funds to buy the the business income and profits and may not want to disabled partner out reinvest profits • Want to share business• Decide to let spouse or decisions with the disabled relative take over their role in partners family the business
  17. 17. Keeping your business investment intact Establishing a buy-sell agreementDisabled owner advantages Healthy owner(s) advantages• Assures a definite price • Avoids negotiation of price and buyer • Assures complete and orderly• Financial future is no transfer of ownership longer contingent on the business’s success • Retains control of the business • Provides continuity and credibility for customers and creditors
  18. 18. Keeping your business investment intactFunding alternatives• Current cash flow• Establish a sinking fund• Borrow the funds• Disability Buy-Out insurance
  19. 19. Keeping your business investment intactDisability 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.
  20. 20. Keeping your business investment intactWhat we will provide to you• Assessment of your current program• Design options• Cost Benefit Analysis• Tax consequences• Implementation steps
  21. 21. 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 + DI = 20% discount Two business owners purchase DBO policies and pay premiums for an employee’s DI 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
  22. 22. Contact my office for more information Name Title Phone | E-mail Name Title Phone | E-mail Insurance issued by Principal Life Insurance Company a member of the Principal Financial Group®, Des Moines, IA 50392, www.principal.comDI 2221 | #5057072009

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