Whether you are just starting a practice, buying an
existing practice, or buying into a partnership, you will have
one thing in common. The need for money. The next step
generally is to find a bank that will lend you this money.
The Problem
It is not unusual for the bank or the loan officer to
request that you guarantee the loan with life insurance in the
event of your premature death and even disability insurance in
case you become disabled. The banks do not care what hardships
may befall you. They want their loan repayment guaranteed.
Most professionals find themselves purchasing a term life
insurance policy to cover the loan in the event of death.
Typically, this can be done rather easily and at a reasonable price
in today's term life insurance market. The policy is then
assigned to the bank.
The next request from the bank may be a bit more
difficult for you to swallow. It is not at all unusual for the
banker to request that you "assign your current personal
disability policy over to the bank in case you become disabled",
and are unable to pay the monthly note. It is also not unusual
for them to request the assignment of your disability business
overhead policy over to the bank.
Now, for the first time, you realize this could
definitely become a problem if you actually were to become
disabled. The bank owns your building all your disability
policies and benefits are assigned to them as well. If disabled,
you would receive nothing....That's a real problem and in need
of a simple possible solution.
A Possible Solution
Business Reducing Term DI was designed to solve this
very problem. The policy provides monthly benefits for the
chosen benefit period, which is usually the same period as the
term of the bank loan. The options available are any number of
years from 5 to 30, but, coverage may not extend beyond age 60.
The policy will insure up to 100% of the monthly loan payments
(principal and interest) where the obligation rests with a
single principal. The maximum monthly benefit is usually $22,500
per month. The elimination periods can either be 30, 60, 90 or
180 days.
Business Reducing Term DI is a separate policy and
is paid in addition to your personal disability and business
overhead policies. It is issued over and above your in force
coverage. This eliminates the need to assign your personal
coverage over to the bank. It solves the problem rather easily
and the cost is extremely reasonable.
When to use Business Reducing Term DI?
Business Expansion
Employee Contract Guarantee
Contract Performance Guarantees
Medium Term Loans
Purchase Agreements
Buying a Practice
And remember the best part of all . . . Decreasing
Term Disability is in addition to any personal disability
insurance you may already have OR may choose to purchase in the
future. A possible solution to "avoiding your personal disability
benefits to a bank"...
Chances are, your banker does not know about
Business Reducing Term DI!
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Articles Disclosure: Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.
