Long-Term Disability Claims for Business Owners and Entrepreneurs

While you always have the option to handle your case on your own, it’s rarely a good idea. Long-term disability cases are almost always complicated, and that’s especially true for business owners and entrepreneurs. Preventable mistakes could cost you tens of thousands—or more. Why risk it?

If you need more convincing, here is a real-life cautionary tale from a past client:

A very successful business owner developed a progressive condition that forced him to sell his lucrative professional practice and make a disability claim. Before filing his claim, instead of consulting with a long-term disability attorney, he only spoke with his financial advisor.

The financial advisor told him he should join his wife’s business as a partner. But the advisor failed to even ask for, let alone read, the business owner’s long-term disability insurance policy. That policy attributed one-half of his wife’s business profits to the claimant, even though he did nothing in the business. Because his wife’s business was also highly successful, his long-term disability claim was properly denied because he could not demonstrate loss of income.

By not speaking with an experienced disability attorney before filing his claim, this business owner left a huge amount of money on the table—with no way to correct the mistake.

First, you should look for an attorney that has experience handling disability claims for business owners, entrepreneurs, highly paid professionals, and other individuals with high net worth and complex finances. These cases tend to be much more complicated (and high risk) than disability claims for hourly wage employees.

Next, after reading your claim denial, your attorney should be able to tell you, in clear language, exactly why your claim was denied and what your next steps will be. You are always entitled to at least one appeal.

Finally, you must be absolutely sure that your attorney is willing to file a lawsuit on your behalf, and represent you in court if necessary, if your appeal is denied. Do not hire an attorney who will only handle internal, administrative appeals.

Here’s why this matters. Insurance companies can, and do, make mistakes and deny valid appeals. But if you made a mistake, and didn’t provide the right information in your appeal, you will generally not be allowed to add new evidence to your claim even if you file a lawsuit. You will probably only have one chance to get this right, so you need a lawyer who will not only get it right the first time, but is prepared to take your case all the way to a judge and fight for you to the end.

Plenty of reasons:

• We file more disability appeals and lawsuits than any other firm in the Mid-Atlantic. (Source: Pacer, the official government site for Federal Court lawsuits.)
• We have extensive experience handling difficult claims for business owners, entrepreneurs, self-employed professionals, and other successful individuals with complex finances.
• We stay with you for the life of the claim, not just through the appeal process. We’ll continue to manage your benefits and deal with the insurance company so you don’t have to. We currently manage more than $33 million in future disability benefits for our clients.
• We only get paid if we win. There’s no risk to you.
• Ben Glass has taught attorneys all over the country about ERISA processes and education. He is a subject matter expert in the industry.
• Our reviews speak for themselves.

There are several.

One obvious challenge is that business owners, entrepreneurs, self-employed professionals, and similar high-net worth individuals have complex finances. They also may have income that varies widely from year to year.

You will have to provide a huge amount of documentation to prove your average annual income. Furthermore, depending on when you file (and how many months’ or years’ worth of previous income is used to calculate your average weekly income), your benefit may be much higher or lower than you expect or need.

Another challenge is that running a business successfully requires sharp cognitive and emotional skills. You need a great memory. You need great critical thinking skills. You have to be able to negotiate, lead, and motivate people.

Disabilities that affect these mental and cognitive skills can absolutely make it impossible for you to do your job, but those conditions are also harder to prove through objective testing. And the insurance company is probably only looking at physical limitations anyway, so they might well say that you are fully capable of doing your job—even when that’s obviously false.

Finally, business owners with good disability insurance benefits are very expensive for the insurance company. If they can find any reason to deny or cut your benefits, they’ll take it.

It depends on the specifics of your policy. In most cases, though, if your disability forces you to cut back on your work, and that reduction can be tied to a specific loss of income (usually greater than 20%), you can file for partial or residual disability benefits. This will pay you a portion of the difference between your pre-disability and post-disability income.

Here’s another real-life cautionary tale:

A business owner had a condition that required him to drastically reduce, but not eliminate, the time he could devote to the business. His friends told him that he made too much money to file a disability claim.

His friends were wrong. This owner should have filed a claim for partial or residual disability benefits.

Not only did he leave hundreds of thousands of dollars on the table—money his family desperately needed—but when it came time to claim total disability under his policy, his benefits were based on his vastly reduced income, not his top-earning years just before he developed his condition. He was forced to sell his house to make up for the reduced long-term disability payments.

Had he come to us as soon as he had a significant reduction in income, we could have helped him maximize his benefits and keep him and his family in their home.

That depends on a whole lot of factors, including your income, how much you need to live your preferred lifestyle, whether you’re responsible for employees, and much more.

Absolutely, you should have a robust individual disability insurance plan that protects your personal income. You should make sure your maximum monthly benefit is high enough to sustain your current income standard, and that you’re reviewing your policy on a regular basis to make sure it meets your needs. For example, high net-worth individuals may consider purchasing policy riders that automatically increase benefits with cost of living, or allow policyholders to purchase more coverage at regular intervals without another medical review.

You might also consider coverage such as:

• Business overhead insurance (BOE) to cover the costs of running your business while you are disabled. Benefits are paid to your company (not you personally) and can cover things like payroll, rent, and utilities.
• Key person disability insurance, which pays your business a benefit if a covered employee is disabled. You might consider this if you have certain employees who would be extremely difficult to replace (niche skills, existing customer relationships, insider knowledge, etc.) and who are critical to the financial survival of your company.