If your small business owner client suffers a disability, how long would his or her business survive?
- Regular living expenses will continue to occur
- Business expenses will continue to occur
- Business income will be severely interrupted
That’s why your small business owner clients need business overhead insurance.
The need for BOE insurance is clear: If small business owners are temporarily unable to work, their business might have significantly less revenue coming in because of their inability to provide the services their clients and customers need. But they would still be responsible for their overhead expenses: rent or mortgage payments, loan payments, insurance premiums and utility bills — not to mention employee salaries.
BOE insurance can help cover these basic expenses for up to two years after a disabling event. So even though the revenue may decrease, the business can stay afloat while the business owner recovers.
One important detail: BOE insurance only covers fixed business expenses. Business overhead insurance won’t cover the cost of buying new inventory, equipment or property improvements — anything that’s above and beyond the basic overhead of the business.
Another cost BOE insurance doesn’t cover is the disabled owner’s salary. For this, your client would need to have individual disability income insurance — which the client should also purchase if she or he does not already have coverage. It will cover the client’s regular living expenses, so your client can maintain his or her fixed expenses at home.
How BOE policies work
BOE policies don’t pay a flat rate for covered expenses, since costs can fluctuate month to month. Instead, benefits are paid monthly up to the policy’s monthly coverage limit. BOE insurance benefits are also reportable as income and premiums are usually tax deductible as a business expense.
Also, there’s a difference between the benefit periods of individual disability insurance and BOE policies. Individual disability insurance policies can pay benefits up to age 65. But a BOE policy benefit period is typically short-term, from 12 to 24 months – just long enough to help the business manage the crisis of disability.
And here’s a perk: The premiums your company pays for BOE insurance are generally tax-deductible. While the benefit payments, on the other hand, are taxable, they are used to pay for overhead expenses which are typically tax-deductible.
Don’t let the lights go out on your small business owner clients
While it’s stressful for your small business owner clients to think about being temporarily disabled at some point, it will be a relief to know that their businesses can stay healthy — even while they recover.
Want to learn more about protecting your small business owners in the event of a disabling sickness or injury?
Source Brokerage disability income specialists can answer your questions, explain the products and walk you through the sales process. Contact Steve Crowe at ext. 222, Alyssa Sollenberger at ext. 235, Destinee Myers at ext. 234, Brian Hettmansperger at ext. 230, Chris Bussey at ext. 220, or request a quote.