September 2012: Business Overhead Expense Insurance

As a business owner, you have undoubtedly invested blood, sweat, tears, and capital into the successful operation of your business. You drive everything forward by establishing the vision, developing the work culture, creating revenue, and managing the day to day expenses associated with “keeping the lights on” to serve your customers.

But would happen to your business if you suddenly had an accident or an illness? If you were unable to work for one month, six months, or even a year, just imagine:

Would key customers/clients lose confidence or loyalty if you were not directly involved? Would you have to turn some of them away simply because you were not able to serve them?

  • Would any key employees leave out of fear of their employment stability?
  • What would happen if you had to close your location, even temporarily?
  • How that would impact your ability to cover all regular, fixed expenses, such as: salaries, rent, utilities, etc.?

Every business owner needs to ask the fundamental question: How long could my business last without me? It’s a difficult question to ponder, for sure, but the good news is that there are ways to prepare for the unexpected. Please invest just a few, short minutes of your time to learn about a strategy that can make certain “the lights stay on.”

What is Business Overhead Expense Insurance (BOE)?

A Business Overhead Expense disability insurance policy reimburses you for existing fixed expenses while you are disabled, thus keeping the company up and running while you recover. This is far different than a personal disability policy, which just supplies personal income in light of a disability. BOE insurance covers the day-to-day overhead expenses such as: employee salaries, rent, leases, utilities, and insurance premiums–basically everything needed to keep the lights on and the door open.

How does BOE differ from Business Income/Extra Expense?

BOE
Provides a monthly benefit for your normal business overhead expenses as a result of injury or illness to yourself.

Business Income/Extra Expense
Protects loss of income and extra expenses incurred that result from damage/injury to your location/operations.

How BOE Insurance Works

Keep in mind that the purpose of a BOE policy is to pay a pre-determined monthly benefit based on your projected business expenses – not your profits. You can customize your BOE policy to meet your specific needs by choosing the benefit amount as well as the benefit payout term of either 6, 12, 18, or 24 months. The attached worksheet will help you identify the amount of business expenses that would need to be paid each month during your sickness or disability.

Depending on your insurance provider, your BOE policy will have a number of rider options that can be used for your benefit.

  • Increase Benefit Rider – benefit grows every year by 3% or 5%
  • Exchange Rider – BOE policy may convert to a personal disability policy
  • Residual Disability Rider – a partial benefit if you’re able to perform, some but not all of your duties

The BOE monthly benefit can put you in a position to cover the hiring expense of an invidual to assume some of your duties to minimize the impact of your absence. It will also enable you to continue to draw your salary, to avoid a personal income loss while you recover.

The premium for a BOE is determined by the monthly benefit value, payout term, and the riders elected. These premiums are generally tax deductible as a business expense.

The bottom line is that your BOE Insurance policy works when you can’t.

But What are the Odds?

Based on statistics of the Social Security Adminstration and the Council for Disability Awareness (CDA), injury or illness can rear its ugly head at any moment even though we think “it will never happen to me.”

  • Just over 1 in 4 of today’s 20 year-olds will become disabled before they retire.
  • Over 36 million Americans are classified as disabled; about 12% of the total population. More than 50% of those disabled Americans are in their working years, from 18-64.
  • A typical healthy female has a 24% chance of becoming disabled for 3 months or longer during her working career with a 38% chance that the disability would last 5 years or longer.
  • A typical healthy male has a 21% chance of becoming disabled for 3 months or longer during his working career with a 38% chance that the disability would last 5 years or longer.

To uncover more disability statistics and risk factors, visit the CDA website.

How We Can Help You…
You’ve worked hard to build a business. A tax deductible BOE Insurance policy can offer you the peace of mind to “keep your lights on,” even if you should suddenly suffer from an injury or illness. Don’t miss the opportunity to prevent your regular overhead expenses from forcing you to close your doors.

As your Trusted Adviser we are committed to much more than simply placing your commercial insurance with the appropriate carrier – we’re here to partner with you in managing your risk and protecting the continuity of your business for years to come.

If you would like to establish a complimentary and customized appointment to review Business Overhead Expense (BOE) Insurance options, please contact us at: 800-95-TOOLE or riskmanagement@tooleinsurance.com.

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