Overhead Expense Disability Insurance

Primary Purpose

Protects the business owner’s ability to meet everyday business expenses when the owner is too sick or injured to work.

Solving the problem

Whether your client is a business partner or sole proprietor, a disability can have a devastating effect on their ability to maintain their day-to-day business expenses. As an owner and key asset to business operations, their inability to work due to disability would likely diminish the business’ ability to provide the services their customers expect, greatly reducing business revenue.

And although revenue would decrease, the routine expenses such as rent, utilities, and employee salaries would continue as normal. Overall, a business owner’s disability would put a heavy strain on both the owner and the business.

Overhead expense (OE) disability insurance covers up to 100% of the routine business expenses during a period of disability. This allows the disabled owner to focus on recovery and getting back to work without the need to worry about maintaining expenses.

Covered expenses

There are numerous routine expenses that business owners face. To help them understand which expenses are covered with an OE policy, we created four primary categories to consider:

Business location expenses

This includes the expenses typically associated with maintaining a business’ building. This can include property taxes, rent, utilities, janitorial and maintenance fees, etc.

Employee payroll expenses

Expenses such as employee salaries and employer-paid benefits for employees that have no ownership interest in the business and who are not members of the owner’s profession.

Business equipment expenses

This category features recurring payments for the owner’s business equipment. This can include motor vehicles, fixtures, furniture, etc. As long as the owner personally has no ownership of the item, we cover the equipment used in the continued operation of your business.

Other business expenses

Lastly, this includes additional expenses that don’t typically come to mind. For example, liability, malpractice, or other business insurance premiums. The owner might also have association dues; licensing, legal, accounting, fees; etc.

Additional features

Accelerated Benefit Endorsement

This feature helps the business owner receive their benefits sooner by providing their maximum monthly benefit prior to providing proof of their expenses. They must, however, still satisfy the elimination period and provide proof of total disability.

Additional Overhead Expense Benefit Rider

Business owners often face fluctuating expenses, making it difficult to plan ahead, especially in the event of disability. This rider provides a pool of funds that the owner can use during periods of disability to help account for the fluctuating expenses.

Extension of Benefits

If the owner remains disabled following the benefit period, this feature will continue to provide benefits until the maximum aggregate benefit is met.

Future Increase Option Rider

As the business and its expenses continue to grow, it’s important that the owner’s policy keep up to provide the necessary protection. This rider provides an opportunity each year for the owner to increase their OE coverage up to the maximum allowed by the rider.

Benefit Purchase Rider

This no-cost rider provides another excellent way for the policy to keep up with increasing expenses. This rider allows the owner to increase coverage every three years without medical underwriting

Partial Disability Benefit Rider

Provides a benefit that is proportionate to the loss of monthly revenue in the business. There must be at least 15% loss of revenue, and the owner must be unable to perform one or more material and substantial duties or be unable to perform them for the length of time normally required.

Professional Replacement Endorsement

Many times, a small business owner provides an essential service as part of the business. For example, an accountant or attorney. This feature provides an additional benefit for the purpose of providing a replacement should that owner go on disability. This helps the business maintain its essential services to its customers.

Business Loan Protection Rider

If the owner is totally disabled, this rider will reimburse the business for covered business-related loan expenses from a financial institution. For clients who wish to obtain business loan protection only, we also offer the rider on a $100 base Overhead Expense policy. Any Overhead policy over $100 would need to reach the policy minimum of $500.

Your Income Protection Rider

Provides an income replacement benefit to the insured if no other income-based disability benefit (IDI, LTD, or STD) is in force or being applied for.

Tax treatment