Who needs Business Overhead Expense Insurance (BOE) ?
If you get sick or hurt, & are out of work for the next 16 months…. would your business survive? Would your business loans go into default? Would your lease & other expenses go into default? Would your employees need to find new jobs? Could you afford to hire someone to replace you so the business keeps going? If you can’t cover these things; would you have to start from scratch when you finally can work again? Or even worse…. be in serious personal debt because of the business obligations?
Business Overhead Expense Insurance (BOE Insurance) is often misunderstood by many business owners. Essentially, it is a disability policy for your business. BOE pays your ongoing business expenses if you or another executive become disabled and can no longer perform your job duties.
What type of expenses does it cover?
Business Overhead Expense Insurance covers most any normal business expense that you regularly encounter. It can include utilities, lease, loans, salaries, replacement salaries, fees to vendors, supplies/equipment, etc. As long as it is a normal expense that is essential to the operations of the business, it is covered.
Who does it cover?
It covers any shareholder who also has an active operational role in the business. Most carriers require multiple policies to be issued to cover multiple shareholders. However, there is one option on the market that offers a “group” BOE policy that covers multiple shareholders under one single contract.
It does not cover non-shareholders. If you need to insure a Key Employee against disability, then you will need a “Key Person” Disability policy.
How does it work?
Business Overhead Expense works in a similar fashion to an individual disability policy. A certain benefit amount is chosen, it is usually based on revenue or that executives contribution to the revenue.
Once the executive becomes disabled, there is a 30-90 day waiting period before benefit payments start. Payments last anywhere from 1-3 years and are paid on either a monthly or annual basis.
Which insurance carriers offer Business Overhead Expense Insurance?
There are multiple providers of BOE Insurance. I usually break them down into the type of business they cater to, a white collar or a blue collar carrier.
For white-collar business owners there is a good selection. Including Guardian, Principle, Lloyds, Ameritas, Mass Mutual, & Ohio National.
For blue-collar business owners, the selection gets more limited. The top blue collar carriers are Assurity and Mutual of Omaha. Lloyds will cover most any business, especially the high risk occupations that the others will not insure.
All carriers have their “sweet spots” when it comes to who and what they are most competitive with. Your occupation, desired benefit amount, and health will be the largest factors to determine which carrier is the best for your situation.
Who needs Business Overhead Expense (BOE) ?
If you own a small business and that would lose revenue if you are not there, then you need BOE Insurance. It covers all the normal operational expenses, plus it provides a benefit for you to hire a replacement to help keep things going.
The normal purchaser of BOE Insurance are small “consulting” type of firms, such as attorneys, medical professionals, shop owners, engineers, architects, etc. They usually have ongoing business expenses that would not cease just because they can’t work for a year or two. Premiums will depend on the type of job you have and how large of a benefit you need. You can expect to pay at least $2k per year minimum, and up to the $8k per year range for large amounts of coverage or high risk occupations.
Do you think that BOE Insurance is right for you? Feel free to Contact Me for more info or a customized quote.
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