Adding a Business Loan Protection Rider to DI

Tim Kukieza   |   May 2021   |   2-minute read
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The Background

Many insurance products are sold as protection — a safety net if something goes wrong. But what if the goal isn’t to just protect their business, but to also set them up to expand or take on new partners? That’s where a business loan protection (BLP) rider comes in. Disability insurance exists to keep the doors open, despite a disabled owner.

The Problem

Many business owners don't have a plan when it comes to adding partners or expanding their business. And there's the added worry of continuing a business if a business owner becomes ill or disabled.

The Client

A business loan protection rider offers solutions for:

  • A client applying for a bank loan for business expansion and the bank wants to ensure the loan obligation will be fulfilled if the client suffers a disability
  • A business owner lending a non-owner money to buy into the business and wants assurance the obligation will be fulfilled should the non-owner become disabled
  • A business owner selling the business and wants to ensure the sale will go through even if the new owner becomes disabled

A BLP rider is designed specifically to help business owners expand or sell their business.

A Business Loan Protection Rider is a tool to help business owners expand, add partners or sell to a new owner

Why BLP?

BLP is a rider on a business overhead expense policy (BOE). Prior to the rider, business owners and lenders had no way to ensure long-term debt would be repaid if the borrower became disabled. BOE policies include a 12- to 24-month protection, but usually nothing longer. And assigning an individual DI policy leaves the borrower’s income unprotected.

How It Works

  • Mirrors the loan obligation and pays the benefit directly to the lender
  • Can be up to 30 years, depending on the age of the client
  • Does not impact the borrower’s ability to purchase individual DI – they can have both to protect their loan obligation and their income
By protecting a long-term obligation against a potential disability, BLP allows the business owner to focus on growth instead of worrying about loss.

Information required for proposal

  • Client name
  • DOB
  • State of Residence
  • Any known health history
  • Occupation
  • Loan Amount
  • Payment Amount
  • Term of loan in years

How to design coverage

Designs should be based on the length and amount of the loan obligation. For example, take an orthodontist looking to expand his building and his practice. He is 45-years-old, lives in Pennsylvania and needs coverage for a $500,000 loan, plus interest. The loan has a 15-year payment plan. The BLP rider with the following elements would provide the right level of protection:

  • 30-day waiting period
  • 15-year benefit period
  • $3,000 monthly benefit

The Results

BLP presents a fantastic opportunity to talk with your business-owner clients about their future plans. You can positively impact your relationship and provide a solution they didn’t know exists, but one that can be extremely beneficial.

Download the printable version.

Tim Kukieza
About the Author

Tim Kukieza is passionate about the income protection he helps to put in place. Tim knows whether you're an individual or a business owner, having DI coverage will dramatically and positively impact clients’ lives when they need it most.