Have you thought about what would happen to your business if you were sick or injured and could not work? Your employees might be able to keep it running for a while. But you still have your monthly expenses. One way to address this risk is to purchase a type of insurance called Business Overhead Expense (BOE). It can help to keep your business going while you recover.
BOE is usually part of the family of disability income products that an insurance company might offer. An individual disability income policy, the flagship of this family, can replace your income lost due to a disability. But BOE is a separate policy that helps to pay for overhead expenses that the business incurs.
Here are some things to know about business overhead expense:
- Fixed Expense – Typically covers fixed expenses the business incurs such as rent, employee salaries, leases, utilities, equipment maintenance
- Not Covered – Review any exclusion in the plan. For example, it may not cover income taxes or the cost of your inventory
- Elimination Period – Benefits are usually paid after an elimination period (or waiting period) that can vary from 30 to 90 days in some cases. A longer waiting period can reduce the cost of the plan
- Benefit Period – After the waiting period, benefits are paid for the term you select. Some companies offer benefit periods that last for up to two years. The longer the benefit period, the higher the cost will be
- Taxation – Generally a business can deduct the premiums paid for a BOE plan, but the benefits received are taxable. Consult your tax professional to determine how it applies to your business
An insurance agent can help you determine what’s best for your business. Qualification for coverage can depend on a number of factors. These may include number of years in business, type of business and your health status/age.
Business overhead expense insurance can help to keep your business running if you became disabled and could not work. By reimbursing the business for regular monthly expenses, it allows the business to continue operating.