WHEN A DISABILITY STRIKES!

(A) Keep business / practice ongoing — requires the continued payment of monthly overhead expenses.

(B) Close the business / practice — All of your time, effort, and money spent to develop the business or practice will be lost.

(C) Sell the business / practice — If financial considerations require a quick sale of the business / practice, you may be forced to sell at a small percentage of the actual worth.

Here are ADVANTAGES,  SOLUTIONS, and BENEFITS
provided by a BOE policy.

#1:  Premiums are tax-deductible.

One of the unique features of business overhead expense insurance is the tax-deductibility of the premium.  While most individual disability insurance policies are not deductible, business overhead expense insurance is regardless of the business entity, i.e. sole proprietor, partner or corporate owner.  Overhead expense benefits received during disability, while taxable upon receipt, are used to pay office related business expenses which are tax-deductible.  The net tax result is a “wash.”  Speak with your tax advisor for more details.

#2:  Premiums are very affordable for your business or professional practice.

The benefit periods available for this coverage are short  12, 18, 24 months with 30, 60 or 90-day waiting periods.  This provides the business owner sufficient time to decide the fate of the business if the disability is short in duration, the policy proceeds will pay the bills until recovery.  If not, these same dollars may keep the business out of significant debt to enable a proper price to be obtained in a sale.  Remember the longer the waiting period and the shorter the benefit period, the lower the premium payments.

#3:  Covers the balance of gross income.

A personal disability policy covers gross income AFTER business expenses.  If a business owner earns $40,000 in gross revenue per month and has $20,000 in business expenses, the balance of $20,000 is insured (at 54 percent) with a personal disability income plan at $10,800.  However, if disabled, the $20,000 in monthly overhead expenses will continue and adequate business overhead insurance must be secured to insure total gross income.  $20,000 of BOE business overhead expense coverage plus $10,800 of personal coverage insures a substantial portion of the $40,000 gross revenue amount.

#4:  High Limits to $30,000 or $50,000 in the domestic marketplace.

Most insurance companies will cover $30,000 to $50,000 of fixed monthly expenses depending on the waiting period from 30, 60 or 90 days and the benefit period from 12 months, 18 months or 24 months.  Since these types of policies are “reimbursement policies,” the benefits may extend past the maximum benefit period.  For example, let’s say you purchase $30,000 a month of business overhead expense benefits for 12 months.  If you only use $20,000 per month for 12 months, you would still have $120,000 available to use.

#5:  Keeps the Doors Open.

The loss of the owner (or co-owner) will often directly affect revenue.  The appearance that the business is still a viable concern despite this loss is critical in the eyes of the customer.  Having a disability policy pay the continuing monthly business expenses can allow the doors to remain open while the owner recovers providing financial and psychological victories that can lead to a speedier recovery.  

#6:  Waives Your Malpractice Premium.

Do you have a plan that can waive your malpractice premium in the event you become disabled?  The BOE policy can do exactly that as malpractice premiums are one of the many covered business expenses.

#7:  Helps hire a substitute professional.

Most insurance companies offer an additional benefit that allows you to pay most or all of the salary of a member of your profession to perform the duties previously performed by you.  This is especially important for highly skilled business owners such as physicians, dentists, lawyers, etc.  If you are unable to work and don’t have someone in your profession perform your duties, your business could collapse.  This is an expense not normally covered under the basic policy without including this extra benefit.

#8:  The carry-over provision accommodates fluctuating monthly expenses.

Overhead expense benefits reimburse the expenses incurred in keeping your office open during your disability.  However, in many practices, these expenses fluctuate, so one month they might be less than the policy benefit, other months more.  Having a carry-over provision solves this problem.  When monthly expenses are less than the maximum monthly expense benefit, the unused benefits are simply carried over and made available for use in months when expenses exceed the maximum monthly benefit. Under certain conditions, overhead expenses may actually continue to be reimbursed even beyond the indemnity period.

#9:  Accumulation of Unused Benefits.

Eligible expenses not covered in a given month will accumulate for payment in later months, subject to the benefit limit provision and other policy terms. While you remain disabled, benefits for that disability are payable until the earlier of:

1) the date and the sum of all benefits paid to you equals the maximum benefit
or
2) the end of the maximum benefit period.

#10:  Protects the insured with favorable own occupation definition of disability.

The definition of total disability in a BOE contract states you will be considered totally disabled if, as a result of injury or sickness, you are unable to perform with reasonable continuity the material and substantial acts necessary to pursue your usual occupation in the usual and customary way.  If unable to work in that job, eligibility for benefits begins.

#11:  The residual (partial) pays a percentage of your monthly overhead expense benefits based on a loss of revenue.

Not all disabilities are “total” and require you to stop working completely.  In fact, recovering from a disability often means a gradual return to work.  

You are not totally disabled and you are able to perform one or more, but not all of the material and substantial duties of your usual occupation or you are able to perform all of the material and substantial duties of your usual occupation but not for the length of time as usual prior to your injury or sickness.  

If you suffer a disability that limits you to part-time work, your practice’s gross revenue may decrease to the point where you cannot meet your office expenses.  In such a case you would certainly need help to pay your office bills, just as you would if you suffered a total disability.  Yet many overhead expense policies require you to be totally disabled to be eligible for benefits.

To avoid this problem, look for an optional policy provision with “residual benefits” paying the difference between current gross revenue and current expenses if you are partially disabled.  These benefits are payable when your practice’s monthly expenses exceed gross income and you have lost at least 15 to 20% of your prior gross monthly revenue depending on the company and BOE policy.

Each company that offers a BOE policy determines and pays residual (partial) benefits in their own way.

#12:  Future Purchase Option.

As your business or professional practice grows, expenses are likely to increase.  This valuable benefit allows you to purchase more BOE without any proof of medical insurability normally until age 55.