By Rich Best

Business owners have a tremendous opportunity to reap significant rewards from a venture in which they have invested heavily. But it is not without substantial risks. The biggest of which is the loss of their ability to generate an income due to a disability. Some business owners understand the risk and have taken the essential step of obtaining disability income insurance. But would they also have enough income to pay the expenses to keep their business running during a period of disability?

A business that can only sustain itself at the hands of one or two key people can be vulnerable to significant financial hardships should they become disabled and unable to contribute as needed. In many cases, if a business owner intends to eventually return to an ongoing business, having business overhead expense (BOE) protection is one of the only ways to ensure that it happens.

A Permanent Business Needs a Permanent Solution

Many business owners invest a significant amount of their time and money into establishing their business. With so much at stake, it doesn’t make sense to address one of the biggest risks you face without a cost-efficient, permanent solution. With a BOE insurance policy you can design coverage that will meet your particular needs, and the premium you pay is locked in for as long as you own the coverage.

Your BOE coverage benefits begin when you become disabled based on the definition of your coverage. BOE is very similar to regular disability insurance and is typically structured along the following lines:

Benefit Period – BOE benefits are paid monthly for up to two years of coverage.

Maximum Benefit – Most BOE policies will cover qualified business expenses up to a maximum amount as established by the insurance carrier. If your actual costs are lower than the maximum amount, the balance accrues inside your coverage for future use if needed, which can extend the benefit period.

Taxes – Benefits paid through a BOE policy are generally taxable to the business; however, BOE insurance premiums are an allowable business tax deduction.

Considering the fact that, if you’re younger than age 65, you have a one in seven chance of becoming disabled for a period of six months or longer, a disability presents one of the biggest risks you face. Your business, and your ability to sustain it, even through a disability, is your most valuable asset, and it needs to be protected as such. When you look into a Business Overhead Expense policy, be sure to work with a disability income specialist experienced in working with business owners.


Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. He has written extensively on a broad range of personal finance topics and is published on several top financial sites.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank or its affiliates.