Disability Insurance and Your Business
Disability Insurance – Protection for Your Practice
Business Disability Insurance and Policies
What happens to your business if you become disabled and cannot work?
What happens to your business if one of your partners becomes disabled and cannot work?
With a business, more people have a financial interest in those questions. The bank, your partners, your landlord, and more, will want to be protected if you are unable to work. Some will require a Business Overhead Expense Insurance policy or a Loan Indemnification Policy as a condition of their contract. While these are often called business disability insurance, they are actually individual insurance policies designed for and dedicated to assisting business owners should a debilitating event occur.
Business Overhead Expense Disability
The primary difference between personal disability insurance and Business Overhead Expense (BOE) insurance is that business overhead expense insurance pays for business expenses; it does not replace personal income. If there are multiples owners in the practice or business, each owner obtains their own business disability insurance policy. There are some significant differences between Individual Disability Policies and Business Overhead Insurance:
- BOE’s often have a shorter benefit period. It is meant to temporarily provide the money necessary to run your business while you’re disabled until that income is replaced by either a return to work or sale of the business. Benefit periods are typically 1-2 years.
- BOE’s often have a shorter elimination period. Because businesses cannot function long without revenue, the elimination period (waiting time) is often shorter for Business Overhead Expense insurance than an individual policy.
- BOE’s may have higher monthly benefits. Because business expenses such as rent, payroll, or commercial debt are usually higher than an individual’s income, Business Overhead Expense insurance policies often pay higher monthly benefits.
- Example: You become temporarily unable to work and your business revenue is adversely affected. Your business might have significantly less revenue coming in because of your inability to provide the services your clients and customers need. But you’d still be responsible for your overhead expenses: rent or mortgage payments, loan payments, insurance premiums, and utility bills — not to mention employee salaries. BOE insurance can help cover these basic expenses for up to two years after a disabling event.
Loan Indemnification Disability
This is an individual disability policy within the scope of business disability insurance designed to pay the monthly loan payment to the lender if an owner is totally disabled. If there are multiple owners of the practice or business, each owner obtains their own policy.
- These are often required by a lending institution when it lends money to a business to cover the payments of the loan and can only extend for the life of the loan.
- Regardless of whether it is required by the lending institution, it is important for an individual to protect themselves from a disabling event that would prevent them from makings their loan payments.
- Example: A radiologist is opening a new practice. A total disability event prevents him from seeing patients. Without a Loan Indemnification policy, he may have to default on the loan.
Desert Mountain Insurance is an independent agency which means we are able to contact multiple carriers so you have a wider choice of options in coverage and in price. For more information about Business Disability Policies or a FREE quote, please complete our questionnaire!
Maybe you’re looking for Individual Disability Insurance to protect you, your family, and your lifestyle. There are several types of individual disability policies available. Do you know the difference between “own occupation” and “any occupation” disability insurance? Read more about it in our article, “Disability Insurance to Protect You” or by speaking with one of our professionals. For a consultation and FREE quote, please complete our questionnaire. and we’ll help you with the information you need to make a sound decision.
The information provided here is subject to change without notice and should not be considered binding or all-inclusive. We strongly suggest that you review your policies carefully so you understand what is included and what is excluded.