Business Overhead Expense
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Business Overhead Expense
What would happen to your business if you were disabled? How would you pay the salaries of your employees and meet your monthly expense obligations?
When a disability occurs, generally three things are sure to happen to a business owner:
- Their regular living expenses will continue to occur;
- Business expenses will continue to occur;
- The income earned from the business will be severely interrupted.
Business overhead expense (BOE) insurance is designed to reimburse a business for overhead expenses in the event a business owner becomes disabled. This is not the same as personal disability insurance which usually pays benefits to age 65. A business overhead expense policy pays a shorter benefit of one to two years after a waiting (elimination) period. It is generally considered that no business can stay open more than two years if the owner is disabled and the business will either be shut-down or sold.
If there is a business partner each partner can take out a policy to accommodate their share of the expenses.
The premiums paid for the business overhead expense insurance is a legitimate, tax-deductible business expense; however, the benefits are treated as taxable income when paid.
Generally, there are two conditions which must be met to trigger the payment of benefits:
- Total disability due to injury or sickness must be present and
- the expenses covered by the policy must be incurred during the disability.
Typically, eligible business overhead expenses are:
- Employee Salaries
- Employment Taxes
- Employee Benefit Costs
- Rental Payments For Property and Equipment
- Principal and Interest on Mortgaged Business Property
- Utilities
- Accounting and Legal Fees
- Business Insurance Expenses
- Interest On Business Debts
- Property Taxes
- General Office Supplies
