California Life-Only & Accident and Health AgentAccident and Health InsuranceMedium
A business owner wants to ensure that if she becomes disabled, her business expenses (e.g., rent, utilities, employee salaries) will continue to be paid. She is looking for a specific type of disability insurance policy that covers these costs. Which policy type should her agent recommend?
- ADisability Buy-Sell Policy
- BBusiness Overhead Expense (BOE) Policy
- CKey Person Disability Income
- DIndividual Disability Income Policy
Show answer & explanationAnswer & explanation
Correct answer: B. Business Overhead Expense (BOE) Policy
A Business Overhead Expense (BOE) policy is specifically designed to cover the ongoing operating expenses of a business when the owner or a key professional becomes disabled. This ensures the business can continue to function during the owner's recovery.
Why the other options are wrong
- A. A Disability Buy-Sell policy funds a buy-out agreement for a disabled partner's or owner's share of the business.
- C. Key Person Disability Income indemnifies the business for the financial loss due to a key employee's disability, not ongoing expenses.
- D. An Individual Disability Income policy replaces a portion of the disabled individual's lost income, not the business's expenses.
Business Overhead Expense (BOE) Policy
A type of disability insurance that pays for the ongoing overhead expenses of a small business if the owner or key professional becomes disabled, ensuring the business can continue operating.
- Covers rent, utilities, employee salaries, etc.
- Benefits are generally taxable to the business.
- Premiums are tax-deductible for the business.
Memory trick: Business disability: Protect profits, partners, overhead.