Disability Protection for Your Business

You may be aware that disability income insurance can protect your employees’ ability to earn an income should a long-term disability keep them from work. But do you know there is also a type of insurance that may protect a business financially in the same circumstances?

Disability overhead expense insurance, sometimes known as business overhead expense (BOE) insurance, is that financial protection for your business. It is particularly suited for a smaller company or practice that depends on a very few people for most of its ability to operate successfully.

What it Does

When a person who is crucial to the success of the business can’t work because of a disability defined by the insurance contract, BOE insurance can step in to cover certain everyday expenses when the policy recognizes that person as a potential trigger to benefits. These expenses can range from employee salaries and employment taxes to mortgage or rent payments, utility bills and
even insurance premiums. The policy will typically have a monthly cap for what it will pay.

BOE insurance may have an elimination period of 30 to 90 days or longer before it begins paying benefits. This same feature is in the disability income insurance your employees may have, with longer elimination periods usually resulting in smaller premium payments.

Policies typically have a maximum term during which benefits are paid, with the most popular being a year or two, although some are longer. This differs from disability income insurance, from which payments can last until age 65 or beyond, depending on the policy terms. Premiums for BOE are generally tax-deductible, but benefits are taxable. Remember, though, that the benefits typically pay for expenses your business may still deduct.

The Difference

While BOE insurance benefits protect your business financially by paying many fixed expenses, it may not pay for the owner’s salary. That’s where disability income insurance comes in, an important benefit for all your employees, including the owners.

Disability can happen to anyone. According to the Social Security Administration, more than one in four 20-year-olds* will become disabled before reaching retirement age. So, talk to your insurance professional to learn more.

*https://www.ssa.gov/disabilityfacts/facts.html