What Is Business Overhead Expense Insurance and What Does It Cover?
Business overhead expense insurance is a type of policy intended to help business owners cover their recurring expenses in the event that they become temporarily or permanently disabled. Getting injured or incurring a serious illness as a business owner can put a severe damper on your earnings plans. If you are strapped with the responsibility to pay off recurring overhead, taxes, rent and other expenses, one incident can potentially turn your business from profitable to bankrupt.
This situation is exactly why business overhead expense (BOE) insurance was created. Learn more about how BOE insurance policies help business owners deal with disability, what situations it can apply to and what its typical limitations are by reading on.
What Does Business Overhead Expense Insurance Cover?
BOE policies typically cover what are considered fixed operating expenses. If a business owner is disabled to the point where they cannot contribute their expected value to operations and their earnings are likely to suffer, then BOE policies can activate and begin covering such costs.
Expenses covered by BOE policies may vary greatly, but typical coverage includes:
- Rent or mortgage interest payments on business properties
- Utilities — internet, water, electricity, water, gas, etc.
- Certain business insurance premiums, sometimes including employee benefit plans or errors and omissions liability
- Payments on loans and debt related to starting the business, including principal and interest
- Taxes on real estate and payroll
- Continuing professional education expenses related to upkeep of professional license requirements
- Professional trade dues
- Interest on office equipment loans and other business loans
- Cost of repairs and maintenance for equipment, computer systems, and other ongoing maintenance costs like laundry and janitorial services
Some BOE insurance policies offer coverage for employee salaries and wages, although these expenses may be only available as a rider. Other riders available include coverage for the salary of a replacement to oversee operations while the owner recovers.
What Are the Limits to a BOE Insurance Policy?
BOE insurance policies are typically time-limited to provide benefits for periods of up to two years. An exclusion period of 30, 60 or 90 days may apply, where coverage is not provided in case the insured recovers fully from their disability.
Those covered by a BOE insurance policy will not obtain benefits for their personal salary; this coverage must be obtained from a personal disability insurance policy. Coverage also does not extend to make up for lost revenues or the costs of inventory.
What Are the Tax Implications of a Business Overhead Expense Policy?
Premiums paid towards a BOE insurance policy are 100% tax deductible for the registered business beneficiary. At the same time, any benefits granted are 100% taxable as business revenue. Review your taxation arrangements with an accountant and discuss your tax strategy with an insurance agent to ensure that your finances can accommodate for a BOE policy.
Ready to Look Into Business Overhead Expense Coverage for Your Company Today?
Explore your options and begin locating the perfect policy and coverage packages for your business’s needs by talking to a commercial insurance agent today.