Replacing Workman's Compensation With Disability Insurance

[The DI Doctor]

With skyrocketing costs for workman’s compensation coverage, there can be an opportunity to use disability insurance as the solution!

Certain states, like California, will allow workman’s compensation to be substituted with disability insurance. If you have a client who is a business owner, this can save him a TON of money and earn you business in the process!

The key to making this work is the business owner would make his key employees 1% business owners. So if he had 10 key employees he would reduce his ownership to 90% and give them each 1%.

Now you have helped your business owner kill two birds with one stone. Instead of worrying about income protection and workman’s compensation, both needs have been handled as you help him design his salary continuation plan for his company! Besides that, when you are doing this for more than 3 lives you can add the extra advantage of discounted premiums as well!

Please let me know if you have any questions.

 

[insuranceexec]

Interesting idea. I am curious; so please humor me.

What are the steps that are involved in allowing a "business" to be sold off, or to be given away?

Is there a minimum percentage that has to be given to qualify for something like this?

 

[The DI Doctor]

Chris,

I can not reply to private messages yet as I am under 30 posts. You have a great question so I will post it here with my reply.

The DI Doctor


__________________________________________

Do you know if you can do this in
SC?

Thanks for the idea!!!!!
- Chris
__________________________________________

You can. I checked your state work comp comm site:

http://www.wcc.state.sc.us/Welcome+and+Overview/faqs/#employer_self

Can sole proprietors or partners elect to be covered under workers' compensation?

Can an employer self-insure for workers' compensation?

The answers I have read confirm that you can have your business owner make his key employees 1% owners, and then work comp is no longer mandatory. Then they can self insure, using disability insurance as a solution.

(This should appear in work comp commission sites in similar wording for other states that offer the same provisions as California or South Carolina.)

 

[GreenSky]

I have a client who did this about 3 years ago. He didn't buy disability insurance but pays 100% for the HSA plan and funds 50% of the deductible.

Rick

 

[The DI Doctor]

I will give you a call to discuss. Take care!

 

[arnguy]

Certainly sounds like a novel approach; however, I don't think that it is permissible in PA.

 

[somarco]

So you have carriers willing to write long tail DI biz on a 24 hour basis?

Interesting.

 

[moonlightandmargaritas]

I don't have too many clients that would give up 10% of their equity to save on worker's comp...

 

[insuranceexec]

I don't have too many clients that would give up 10% of their equity to save on worker's comp...

I agree; which is why I asked my question.

 

[djs]

This is nothing new. A lot of states don't require the owner to be covered under workers comp. If they are, you can pull them off workers comp, and if you chose, put them on DI.

Problem is, DI isn't really a workers comp replacement. If you are out for 2 weeks, the DI coverage won't even kick in. If you have large medical bills, health insurance may exclude coverage since workers comp should apply.

While the income coverage of DI sounds good, you have to check to see if they have health coverage that will cover work related injuries.

Also, is DI any cheaper than workers comp? I doubt it, but I've never tried to compare the 2 before.

Dan


P.S. I'm a big believer in DI coverage. I have it myself, but I'd have to check to see if I'd be willing to arbitrarily recommend replacing workers comp with it.