Business Overhead Expense Insurance

Business Overhead Expense (BOE) Insurance is a type of policy designed to help cover the ongoing operating expenses of a small business in the event that the owner or a key employee becomes disabled and is unable to work. This insurance is particularly important for small businesses and professional practices (such as medical, dental, or legal practices) where the business's ability to generate income is heavily dependent on the skills and abilities of one or a few individuals.

Key features of Business Overhead Expense Insurance include:

  1. Coverage: BOE insurance typically covers fixed operating expenses of the business, such as rent or mortgage payments, utilities, employee salaries, business insurance premiums, property taxes, and possibly the principal and interest on business debts. It does not cover the income of the business owner or lost profits.
  2. Benefit Period: The benefits are usually paid on a monthly basis for a short term, often 12 to 24 months, which is considered sufficient time for the owner to recover and return to work or to make alternative arrangements for the business.
  3. Eligibility: To qualify for benefits under a BOE policy, the business owner must be unable to work due to a covered disability. The specific definition of disability will depend on the terms of the policy.
  4. Tax Treatment: Premiums paid for BOE insurance are generally tax-deductible as a business expense, and the benefits received are considered taxable income since they are used to pay deductible business expenses.

BOE insurance is a useful tool for ensuring the continuity of a business during periods when its key personnel are unable to work due to illness or injury. It provides financial stability and protects the business from having to use personal or business savings to cover operating expenses, thereby helping to keep the business solvent until the owner or key employee can return to work.

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