BUSINESS OVERHEAD EXPENSE INSURANCE

Business Overhead Expense insurance is designed to reimburse your business for overhead expenses during your disability. This policy can insure up to $30,000 a month in overhead expenses. No small business can stay open long while the business owner is not generating new revenue. In a very short time, the business will either shut down, or the business will have to be sold. An overhead expense policy is made to give a business owner the ability to come back to an existing business if he is able to, without this coverage the owner does not have this option.

Your 1120-S business tax return lists the overhead expenses that we can insure for your business. For many business owners, a BOE policy is more important than a personal policy is. Do you leave your money in the business? If you do, this is the only policy that can insure this income. Business overhead expenses mount up very quickly during a disability. If you have $20,000 a month in overhead, just six months of disability leave you with a $120,000 of debt, without any new revenue coming into your business because you were not there. Like we said before, this could easily be more important for you than a personal policy.

The premiums are deductible, too. The Internal Revenue Service has ruled (Rev.Rul.55-26, 1955-2 CB 11) that premiums paid for an overhead expense disability policy are tax deductible as a business expense. While benefits received at claim would be treated as income, such income is used to pay the deductible expenses that this coverage covers.

What is the difference between BOE and a personal policy? While a personal disability policy is designed to replace your personal income, a BOE policy replaces the expenses your business still incurs while you are disabled. A personal policy usually pays benefits to age 65, an BOE policy usually has a shorter elimination period, and a shorter benefit period of one or two years. The reason an overhead expense insurance policy has a shorter benefit period is simple, no small business will stay open more than two years if the owner is disabled. In that time you will either shut down, or sell the business. An overhead expense insurance policy is made to give you the time, and ability to make the decision to come back to work, or to sell the business.

Answer this question. How long could your business stay open if you were disabled? While you are disabled, your business should be able to remain open. It cannot do so if the overhead expenses continue, but you are not there to bring income into the business.