A disability can be disastrous for a small business. If the business owner can no longer work, the business may not be able to generate revenue. Meanwhile, the overhead expenses keep piling up. If it goes on long enough, the business might go under. Business overhead expense (BOE) insurance is a special type of disability insurance (DI) designed to prevent this outcome. Multiple carriers offer BOE, and although the basic principle behind the coverage is the same, the policy details can impact what benefits are available and how much support business owners receive. Use this DI BOE comparison guide to find the terms that meet your needs.
The BOE Basics
Before we get into the nitty gritty policy differences, let’s go over the basics.
Traditional disability insurance replaces income if the insured is unable to work due to a disability. BOE insurance is different. It does not replace income, and it is not designed to help an individual with personal expenses. Instead, it covers certain operational costs associated with running a business.
If an insured experiences a disability, BOE insurance pays for certain overhead expenses. These expenses typically include things like rent, utilities, property taxes, office equipment expenses, salaries, payroll taxes, insurance premiums for employees, accounting fees, and professional membership dues and subscriptions. Certain types of expenses, including income tax and the cost of inventory, are typically excluded.
BOE insurance is intended to provide short-term coverage. Policies typically provide coverage periods of 12 to 24 months. This is designed to give the business owner enough time to recover or, if recovery is not possible in this period, to make other arrangements for the business.
Beyond these basics, various carriers may offer different features and riders that provide additional benefits and important terms. If a business owner ever needs to file a claim, these details may make a big difference in what happens next. Therefore, it’s important to consider your options carefully.
Carriers Offering BOE
Multiple carriers offer BOE insurance. These carriers include (but are not limited to) Ameritas, Assurity, Illinois Mutual, Lloyd’s, Mass Mutual, Mutual of Omaha, Principal and the Standard.
The following section of this BOE comparison guide looks at some of the key features offered by individual carriers. Some features may come standard with no additional cost, while others may be optional riders that increase the premium amount. Note that the features may vary depending on the state, the occupation class and other factors, and this information is subject to change. Also, the following features may not be an exhaustive list of all features available. Always check the policy for current and accurate coverage details.
Ameritas
Ameritas offers BOE coverage that includes the following features:
- Residual benefit
- Good health benefit
- Rehabilitation
- Waiver of premium
- Accumulation benefit
- Legal and accounting fee benefit
- Workplace modification
- Finder fee benefit
- Advance benefit
- Extended residual
- Substitute salary expense
- Future increase option
- Business loan repayment
Assurity
Assurity offers business overhead expense disability income insurance with the following features:
- Total disability benefit
- Partial disability benefit
- Presumptive disability benefit
- Survivor benefit
- Rehabilitation benefit
- Waiver of premium
- Conversion to an IDI policy
Illinois Mutual
Illinois Mutual offers business overhead expense coverage with the following features:
- Access to Business Owner Rewards if conditions are met, including a premium discount, Business Owner Allowance, and Business Owner Class Upgrade
- Return of premium rider
- Full benefits for mental or nervous disorders, alcoholism or drug abuse rider
- Guaranteed insurability option rider
- Retroactive injury benefit rider
loyd’s
Lloyd’s may be a good option for anything beyond what traditional carriers can handle. Petersen International Underwriters, a coverholder at Lloyd’s, offers business overhead coverage with the following features as either standard or optional:
- Monthly Benefits
- Carry Over Benefits
- Residual Benefit Rider
- Salary Replacement Rider
- Waiver of Premium
- Presumptive Disability
- Transplant Benefit
- Recurrent Disabilities
Mass Mutual
Mass Mutual provides business overhead expense insurance with the following features:
- Non-cancellable, guaranteed protection to age 65
- Automatic benefit increase rider
- Additional monthly benefit rider
- Future insurability option rider
- Income protection rider
- Partial disability rider
- Professional replacement expense rider
Mutual of Omaha
Mutual of Omaha offers business overhead expense insurance with the following features:
- Monthly benefits of $500 to $20,000
- Elimination periods of 30, 60, 90, 180 or 365 days
- Benefit periods of 12 or 18 months
Principal
Principal offers Business Overhead Expense insurance that may be available with the following features, depending on the state:
- Automatic increase option
- Benefit update
- Business loan protection
- Residual disability benefit
- Select occupation, multi-life and association discounts
- Non-cancelable and guaranteed renewable to age 65 or for five years from policy date, whichever is later
The Standard
The Standard offers business overhead protection with the following features:
- Renewable after age 65
- Total disability benefit
- Partial disability benefit
- Benefit and expense carry-forward feature
- Conversion option
- Waiver of premium benefit
- Survivor benefit
- Cosmetic or transplant surgery benefit
- Salary replacement rider
- Residual disability rider
- Future purchase option rider
Key Elements to Check
When comparing your BOE insurance options, pay attention to following elements:
- Disability definition and exclusions: How the policy defines disability can be important. Pay attention to whether coverage is available for total disability only or for both total and partial disability. Also look for certain types of disabilities that may be excluded. For example, are disabilities related to mental health or substance abuse covered? Disabilities tied to war, self-inflicted injuries and criminal activity may also be excluded.
- Covered expenses: Certain overhead expenses are covered by most policies, but there can be some variation here. If a business owner has a major expense that they’re worried about, make sure it’s covered.
- Elimination period: The elimination is the waiting period that has to pass before benefits are paid. The elimination period can vary significantly from policy to policy. Some are less than a month, and on the other extreme, some are up to a year. A longer elimination period may come with a smaller premium, but if the business doesn’t have funds to cover costs during this period, it could end up being a major problem.
- Benefit period: BOE policies usually have a benefit period of 12 to 24 months, but not all carriers offer 24-month terms. An additional six or 12 months of benefits might make a big difference to a business trying to deal with a disability, so this is an important issue to consider.
- Maximum monthly benefit: The carrier will not pay more than monthly benefit, so businesses with higher overhead costs will need to look for a carrier that offers higher monthly benefits. This can vary significantly from carrier to carrier.
- Renewability: Always check to see if the policy is non-cancellable and has guaranteed renewability. Also look at the age requirements. For example, a policy may be available to new applicants under 60 and renewable until age 65. Some policies are renewable to a later age, and they may have a different age limit for policy issuance. For business owners who plan to work past the normal age of retirement, this can be a critical point. Additionally, riders like the future purchase option can make it easier to increase coverage.
This BOE comparison guide should help you find a policy that matches your needs. If you need more support, DIS is here to help. Contact us.
