When disability strikes it has the potential to be financially crippling for the disabled individual and his family. This financial severity can be compounded for small business owners and professionals (eg accountant, lawyer, physician, dentist). Since many of these operations are dependent on a single individual, a disability would be potentially devastating to the businesses. Business revenue would cease, but business expenses such as rent, salary, utilities and property taxes are ongoing. Where will the income come from to cover these liabilities? A personal disability insurance policy will make sure the business owner or professional is taken care of, but will there be a business to return to after recovery?
To address the need for covering business expenses during a period of disability, overhead expense insurance provides interim insurance protection when the income of a business decreases dramatically or ceases completely. It ensures that the business will continue when a disability occurs. Ongoing expenses mentioned above would be covered to keep the business running while the business owner or professional recovers. But single occurrence expenses such as expansion or employee bonuses.
Typically, benefits would be paid monthly after a waiting period of 30-60 days to a maximum of 24 months. At that point, if the principal is still disabled, it’s more than likely that he will not be able to recover and resume his role. Therefore, he should make a decision about the future of the business before the 24 months have passed.
Unlike other forms of business insurance (key person insurance, buy-sell insurance), overhead expense insurance is tax deductible for the business. Although the benefits are treated as taxable income, the actual business expenses will offset the income, resulting in no net tax payable from the policy.
All of these features make overhead expense insurance a key component of any business owner’s financial security plan. To see how we can help you protect your business with overhead expense insurance, head on to our contact page and send us an email.
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