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Anthony J. Bardi
Registered Representative
Enrolled Agent, LTC# 454
Tax and Financial Solutions, Inc.
151 SE 223rd Avenue
Gresham, OR 97030
Phone: 503-666-7909
March/April 2020
Overhead Expense Insurance
You may be aware that disability income insurance can protect your employees’ ability to earn an income should a long-term disability keep them from work. But did you know there is also a type of insurance that may also protect a business financially in the same circumstances?
Disability overhead expense insurance, sometimes known as business overhead expense insurance (BOE), is that financial protection for your business. It is particularly suited for a smaller company or practice that depends on a very few people for most of its ability to operate successfully.
What It Does
When a person who is crucial to the success of the business can’t work because of a disability defined by the insurance contract, BOE insurance can step in to cover certain everyday expenses when the policy recognizes that person as a potential trigger to benefits. These expenses can range from employee salaries and employment taxes to mortgage or rent payments, utility bills and even insurance premiums. The policy will typically have a monthly cap for what it will pay.BOE insurance may have has an elimination period of 30 to 90 days or longer before it begins paying benefits. This same feature is in the disability income insurance your employees may have, with longer elimination periods usually resulting in smaller premium payments.Policies typically have a maximum term during which benefits are paid, with the most popular being a year or two, although some are longer. This differs from disability income insurance, from which payments can last until age 65 or beyond, depending on the policy terms. Premiums for BOE are generally tax-deductible, but benefits are taxable. Remember, though, that the benefits typically pay for expenses your business may still deduct.
The Difference
While BOE insurance benefits help to protect your business financially by paying many fixed expenses, it may not pay for the owner’s salary. That’s where disability income insurance comes in, an important benefit for all your employees, including the owners.Disability can happen to anyone. According to the Social Security Administration, more than one in four 20-year-olds* will become disabled before reaching retirement age. So talk to your insurance professional to learn more.
* https://www.ssa.gov/disabilityfacts/facts.html
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Tax and Financial Solutions, Inc. and LTM Client Marketing are unrelated companies. This newsletter was created by LTM Client Marketing and was not written or created by the named financial professional and does not necessarily represent the views and opinions of Avantax Wealth Management® or its subsidiaries.
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