Should a small business or practice be confronted with the loss of a principal or a partner due to disability, how will the monthly expenses be addressed? To protect against the loss of revenue generated by the disabled person, a monthly benefit will be paid to the business to prevent the demise of the business.
Business owners can protect the operations of their company or practice by purchasing a business overhead expense (BOE) insurance policy. This insurance plan reimburses the insured for overhead expenses in the event a principal or partner becomes disabled. Without this insurance policy, disabled business owners may not have any other options to save their company or practice.
A BOE policy pays for the everyday operations of a business if a primary employee such as an owner becomes disabled. Premiums for BOE insurance policies can be written off as a business expense, however any benefit payments are considered taxable income. The payments are then used to pay business expenses that are tax deductible.
Typical Covered Expenses:
- Mortgage interest or lease payments
- Employee wages
- Utilities
- Business insurance premiums
- Salaries, fees wages, benefit payments and employment taxes for employees
- Rent and lease payments for furniture, equipment and premises
- Utility costs including phone, electricity, heat and water
- Laundry, janitorial and maintenance service costs
- Property, liability, malpractice and business insurance premiums
- Professional, trade and association dues
- Business property taxes
- The greater of depreciation or principal payments on business loans on business property
- Interest on business debt existing on the day the disability begins
- Legal, accounting and similar business fees
What BOE Insurance Policies Won't Cover
- Salaries of business owners
- Employees brought in to replace the disabled insured
- Family members
- Partners or employees that do the same work as the disabled person. For example, doctors in a practice cannot have their salaries paid for if another doctor becomes disabled.
- BOE plans do not pay out a flat rate for covered expenses Instead policies are paid out monthly up to the policy’s monthly coverage limit.
For more information about this or another plan or if you have a question contact Andrew @ (516) 485-3311