Business Overhead Expense Insurance

Business overhead expense insurance reimburses eligible fixed business costs while an owner is disabled. Learn what is typically covered, what is excluded, and how it differs from personal disability coverage.

If an owner who generates the revenue becomes disabled, rent, staff payroll, and lease payments keep coming due. Business overhead expense (BOE) insurance is designed to reimburse eligible fixed expenses for a limited period so the business can stay open while the owner recovers or plans a transition.

What BOE typically reimburses

Eligible expenses usually include rent or mortgage interest on business property, utilities, salaries of non-owner employees, equipment leases, professional dues, and business insurance premiums. Policies generally exclude the disabled owner's own salary, cost of goods or inventory, and expenses that would not continue in the owner's absence. Exact definitions vary by carrier and contract.

Benefit periods are short compared with personal disability insurance, commonly 12 to 24 months, with elimination periods often in the 30- to 90-day range. Coverage is sized to documented monthly overhead.

How BOE fits with other coverage

BOE protects the business's fixed costs. Personal disability income insurance protects the owner's own income. Disability buyout insurance funds a transfer of ownership if the disability turns out to be long-term. Many practice owners need to consider all three, sized so they do not overlap.

Premiums for BOE are generally deductible as a business expense, and benefits are generally taxable when received, which offsets the deductible expenses they reimburse. Confirm treatment with your CPA.

Suitability & Limits

Underwriting includes the owner's health and documentation of business expenses.

Benefits reimburse actual eligible expenses, up to the policy maximum.

Not a substitute for personal disability income coverage.