Business Overhead Expense (referred to as BOE) insurance provides payments for the insured’s business overhead expenses if the business owner becomes disabled. The protection is for covered injuries and illnesses. This policy will keep the business running until such time as the business owner is able to return to work. It is available to sole proprietors and partnerships.
What Are the Expenses Covered by the Business Overhead Expense Insurance?
The expenses that would be funded by Business Overhead Expense insurance policy are rent, utilities, payroll taxes, accounting fees, property taxes and insurance premiums for employees, loans, office supplies and equipment, and general maintenance services. Additional covered items include professional membership fees and professional subscriptions.
Excluded expenses can be some taxes such as payroll and property taxes. Other excluded items are inventory costs. It does not provide payments to replace the insured’s personal salary. That would be covered by a personal disability insurance policy.
Why Is Disability Insurance Issued? Does It Have an Elimination Period?
The disability insurance is issued to provide coverage for temporary disabilities. A typical period of coverage is 12-14 months. The benefit is a monthly payment based on actual expenses not anticipated profits. Monthly payments can fluctuate based on your businesses’ month to month expenses.
The disability insurance policy does have an elimination period that can be as little as 30 days from the date the insured becomes insured or can be as long as 90 days from that date. Longer elimination periods result in lower premiums.
The elimination period is a waiting period that starts when the insured becomes insured and ends when the insurer begins payouts. Business Overhead Expense policies typically have elimination periods that are 30, 60 or 90 days long. The premium is based on the amount of coverage purchased but other factors taken into consideration are health, age and the occupation of the insured.
The Business Overhead Expense insurance is a disability insurance policy and should not be confused with the Disability Buy-Out plan of insurance which is designed to provide the funds necessary to purchase an owner’s interest in a small business if the owner, or a partner, should become disabled.