What is Business Overhead Expense?
Business Overhead Expense is an insurance policy that reimburses a small business owner for certain business expenses if they become sick or hurt and unable to work. The monthly benefit amount is based on qualified business expenses at the time the policy is purchased. A typical policy can reimburse up to $50,000 of monthly expenses.
Target Markets
- Small to medium-size businesses with up to eight owners
- Occupation classes that are white and grey collar
- Owners whose personal service is key to the continued earning of business income
- Companies with less than 20 employees
- Law firms, physicians, dentists
Examples of Covered Expenses
- Rent or mortgage (interest and principal)
- Subscriptions and membership dues
- Salary for your replacement
- Employee salaries
- Property tax
- Equipment leasing costs
- Security and maintenance
- Electricity
- Telephone
- Business-related loans
- Insurance premiums (property, malpractice, fire, etc.)
- Accounting, billing and collection fees
Common Questions
What is an elimination period?
The elimination period is the period that must pass before benefits are payable. Typical elimination periods include 30, 60, and 90 days. The shorter the elimination period, the more costly the plan.
What is a benefit period?
The benefit period is how long benefits are payable while you are on claim. Typical benefit periods are 12, 15, 18, or 24 months. The longer the benefit period, the more costly the plan.
What is the definition of Total Disability?
Most policies will consider you to be disabled if you cannot perform the substantial and material duties of your occupation, and you are not working.
What is the definition of Residual Disability?
Residual disability provides a benefit if you are not totally disabled, but you can work on a part-time basis and continue to have a loss of earnings. Benefits are payable only if gross revenue is less than actual overhead expenses.
What is a Future Purchase Option?
Future Purchase Option (FIO) is an additional cost rider. It provides a pool of monthly benefit that can be purchased in the future as business expenses grow. Additional monthly benefit can be purchased without evidence of medical insurability. It guarantees that the insured will be able to purchase additional coverage without regard to a change in health. The FIO rider can add an additional 10%–15% cost.
What does business overhead expense cost?
The cost for coverage depends on factors such as age, occupation, health and amount of monthly benefit purchased. Once the policy is purchased, the rate is usually guaranteed not to increase until the insured's 65th birthday. Coverage is much less expensive than a personal policy since the benefit period is shorter and the benefits are paid as a reimbursement.
Ready to Get a Quote?
Download the Business Overhead Expense RFP for full product details, or fill out the form online and Southwest DI Brokerage will follow up with same-day proposal service and expert pre-sale underwriting consultation.