The best disability insurance? A strong advisory board

by Tom Waring, Jr.
Principal, GCW Capital, LLC

Many successful businesses rely on one or two driving leaders—often the founders who have governed their business and inspired their team to move toward strategic objectives and goals. But what if this leadership is compromised by a significant health change? The premature death or disability of those in charge at a closely-held or family-held company can wreak havoc if the business is not prepared with a succession plan.

Business owners can reduce this risk by putting together a group of three to five independent, engaged members of an advisory board who become very familiar with the company’s vision and its strategic plan. This group may even help to develop that strategic plan. The board of advisors should work with the owners on the business, but not in the business.

These advisors could be called upon in such a crisis to become the company’s board of directors and serve in roles such as trustee or power of attorney. A reliable advisory board can help sustain the business through the temporary or permanent loss of a business leader until the company can be successfully transitioned to another owner, such as a key employee or other family member. If the best way forward is selling the business, these advisors can ensure the sale is completed successfully and for full fair market value.

I have been selling disability insurance for more than 30 years to business owners. While this insurance provides important replacement of income, it does not address these strategic issues that can have a significant impact on the future of the company. It provides cash, not leadership. A business with cash but no leadership soon is without cash. I believe the best form of disability insurance for the business itself would be a well-developed board of advisors.