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A disability policy owned by your company can provide a monthly payment. It can help keep your business running smoothly and cover expenses if an illness or injury keeps you from working. While a disability can often be visible to the naked eye, not all disabilities are so easily recognized. Chronic pain or a mental health issue can also qualify as a disability.
Depending on your situation you may need only critical illness and disability insurance but there are many times when you need both to fully protect yourself. Critical illness and disability insurance work together to help reduce the impact of disability or serious illness.
To prove eligibility for disability insurance, the policyholder needs to meet the policy’s definition of disability. Two common definitions are own occupation and any occupation: Own occupation means if you can’t perform the duties of your regular job, you’ll be considered totally disabled and eligible for benefits. This doesn’t mean you have to be bedridden, just that you can’t perform your regular duties. Any occupation means if you can’t perform the duties of any reasonable job that would typically be suitable for you, you’ll be eligible for benefits. If you are able to work part-time in your normal job or in some other comparable field, you won’t qualify for your full disability benefits. However, you still might be able to receive a partial benefit. Once you’re eligible, you still need to fulfill an elimination period (or waiting period) before receiving your first disability income check. The longer the wait you selected, the less expensive your disability insurance policy will be. Finally, once your disability benefit payments begin, they will last until the end of the benefit period. This will depend on whether you purchased a short-term or long-term disability insurance policy.
Business Overhead Expense insurance, also known as BOE, is disability insurance that pays monthly payments to cover business expenses so your business can continue to operate smoothly if you become disabled. Who can get BOE?To qualify for BOE, you’ll need to show a certain amount of revenue and typically need to be between the ages of 18 and 64. You also need to have been in business for at least two years. If you work from home, insurance companies usually don’t let you take out BOE insurance. What does BOE cover?It covers a range of “usual and customary” business expenses like:
How long do you have to wait to receive benefits?BOE policies generally have short waiting periods or “elimination periods,” often no more than a month, so that operating expenses can begin to be covered right away. Choosing a longer elimination period means you’ll save money, but there’s a higher chance you’ll recover from an injury or illness before the insurance company must pay benefits. How much does BOE insurance pay?Quality BOE insurance coverage should pay 100% of your monthly operating expenses up to your maximum monthly benefit amount. When you receive benefits, if you had lower expenses in one month, your unused monthly benefits can roll over to the next month. For example, over a 2 month period, if your base monthly benefit is $20,000 per month, but you only used $18,000 the first month, then your BOE insurance can pay up to $22,000 in expenses the next month. How long do benefits last?The benefit period should be long enough to cover the business for an extended disability and to determine if the owner will be able to return to the business in, for example, one to two years. Are there tax advantages with BOE?Yes! Premiums are tax deductible, but benefits are taxable. What’s not covered by BOE insurance?
The Bottom LineBOE insurance helps pay for business expenses if the business owner becomes disabled. Running a business is challenging, even when you’re healthy. Your business probably relies on you, so it makes sense to protect it and your family from your inability to work due to a disability. |