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Overhead Expense Insurance - What is it? Do you need it?

Business overhead expense insurance is critical to a small business owner. As a business owner, you know that your ability to work is critical to the success of your business. If you should become disabled due to an illness or accident, you should already be covered by your own, personal, individual disability insurance policy.

Think for a minute - you have ongoing monthly expenses. If you were ill or injured for more than 30 days - you would still have to pay those expenses. Individual Disability Income Insurance only covers your bills, not the bills of the business. [Loan/Lease Payments, Insurance Payments, Employee Salaries, Membership Fees, Marketing Subscriptions, etc]

This policy will take care of your personal expenses. Should you be unable to work, an individual disability insurance policy helps you pay your mortgage, car payments, and living expenses. Depending on the amount of coverage that you have, your standard of living (at least financially) might not even change at all.

But, what about your business expenses? What is your plan to take care of your business expenses should you become disabled?

Enter business overhead expense insurance or BOE.


In running your business, you have fixed costs that you’ll incur whether or not you’re actively working. Should you suffer a sickness or injury that prevents you from performing your job duties, the expenses that your business incurs will continue to accrue.

This is where business overhead insurance can be very important.

Business overhead insurance reimburses a business owner for business expenses incurred during a disability. The expenses covered by a BOE policy are normally those that are deductible for federal income-tax purposes. Typically, expenses such as a mortgage or rent, salaries, and utilities would be covered. Some types of insurance, such as malpractice and liability, may also be covered.

Specifications will vary from carrier to carrier but BOE policies are normally open to all occupation classes. Benefits can range from 12 to 30+ times of covered expenses up to a maximum of $50,000 per month (for most policies). In addition, elimination periods can be as short as 30 days or as long as 90 days.


Some businesses have large amounts of overhead. While uncommon, it isn’t rare to see a small business with well over $50,000 per month in overhead. This is where Disability Income Protection Group can help by offering a supplemental business overhead expense insurance disability plan for your business.

This plan is supplement to your existing coverage and will increase your total benefit to help pay the rent, keep the lights on, fulfill paychecks and other payment obligations.

If you have to close your business during your disability recovery period, you can lose existing business and it may take years to recover from this loss.

Key benefits of a supplemental plan:

High limits, up to $100,000 per month in benefits

Difficult or unusual occupations can be covered

Impaired Risks – Unlike traditional carriers, these can handle many health impairment situations

Not limited by groups of the same occupation – Most carriers will not consider a group of business owners who are all in the same occupation


Elimination periods of 30,60,90 or 180 days

Benefit periods of 6,12,18 or 24 months

Benefit amounts of $1,000 – $100,000

Optional riders:

Residual benefits rider

Salary replacement rider


Unfortunately, mortgages and salaries aren’t the only costs that most businesses are likely to have. Many businesses have loans or partners to take into consideration. What happens when a disability prevents one business owner from fulfilling his or her obligations to the other owners of the business?

A disability buy-out plan can help mitigate this risk. These policies are structured to provide funding for business partners to use to purchase an owner’s interest in the business if he or she becomes totally disabled. This coverage maximizes the financial return when a business is transferred while minimizing tax liability.

Some business overhead expense insurance policies will offer a rider that will cover loans taken out for business related expenses.

For example, let’s say that a veterinarian has a business loan that he used to purchase an existing practice. While all of the traditional expenses of the business would be covered by his BOE policy in the event of his disability, the loan might not be. Having a business loan protection rider would cover this expense and benefits can even be assigned to the financial institution holding the loan.

What if one of your employees is critical to your company’s success becomes disabled? A key person disability insurance policy can help protect against that risk.

Key-person disability policies insure a key employee/partner who is critical to the livelihood of the business, who is actively working full-time, and who does not own more than 50% of the business. Benefits can be paid monthly or as a lump sum. The maximums are typically based on the key employee’s earned income and the benefits are paid to the business to be spent at its discretion.


Business overhead expense insurance is a necessity for any small business. Having a BOE policy in place can help the business weather the storm when an owner or critical employee is unable to work due to sickness or injury. Big players in the disability insurance universe such as Principal, The Standard, and Guardian all offer these policies. Benefits will vary among each but the core coverage is what is most important to secure.

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