What Is Business Overhead Expense Insurance
Owning a business without question comes with a lot of challenges. It takes a lot of hard work to get a business going, and any type of setback can be pretty devastating. Disability insurance is something that a lot of people are familiar with, but what happens if a business owner has some type of issue?
This is where business overhead expense insurance comes into play. It is designed to cover everything that goes into running a business when an owner has to miss time because of a disability. Everything from wages for workers to the monthly rent or mortgage for the business is covered.
Business overhead expense insurance does not replace disability insurance. Perhaps the biggest difference is that disability insurance is going to be the only way a business owner actually gets coverage for lost wages. That is something business overhead expense insurance does not cover.
Since this business insurance can be a little complicated, here is a look at a few of the most common questions people have.
How do you qualify for business overhead expense insurance?
The basic qualifications for this type of insurance are to be a business owner between 18-64 years of age. The business must be running for at least two years, and in almost all cases, it has to be a physical location instead of a work from home business.
How long can a person use insurance?
Every insurance policy is going to be different, but the most common amounts of time are either 18 months or 24 months. There are always going to be special situations, but anything over two years it is usually not going to be covered. In some cases, older business owners will only get 12 months of benefits if something bad is to happen.
Is there a waiting period with this type of insurance?
Every policy is going to have some type of waiting period before getting benefits. The higher the premium, the less amount of time a person has to wait. Most waiting periods are going to last 1-3 months.
What exactly is a disability?
For a person to qualify for full coverage, they definitely need to be under medical care. They also need to be unable to perform at a job on a daily basis. This might be pretty straightforward, but insurance companies will always need proper documentation to make sure that a person is fully disabled.
Can a person get a residual disability?
A person can actively look for insurance that will offer residual disability benefits. This means that a person can receive a little bit of coverage by being only partially disabled. This comes in handy for someone who might be able to do some of the tasks in regards to the business, but not all of them in their current medical state.
How much money should a person expect?
This is really going to depend on how much is spent on the coverage in general. The best type of insurance is going to pay 100% of all monthly operating expenses though.
Is insurance easy to renew?
Most insurance is going to automatically renew as long as a person is paying their premiums. The only time it might start to slow down is if the person reaches the age of 65.
What is the tax situation with this insurance?
Premiums are likely to be tax deductible for a lot of business owners. However, it should be noted that any benefits received will act like business income. That means a person is going to have to end up paying taxes on that. The owner should really just look at any payout the same was as regular pay. If the money is used for business expenses, the same tax rules will be applied.
Besides personal wages, is there anything else that is notably not covered by this insurance?
Really the only notable thing that is not covered besides personal wages is office improvements. Think of things like getting new furniture or renovating the area. A business owner can't request additions to the office space or even a new office space that is bigger. This has to be handled once a person is back to working as normal.