California Life-Only & Accident and Health AgentAccident and Health InsuranceHard
A business owner wants to purchase a disability income policy for herself that will cover her business expenses if she becomes disabled. Which type of policy is most suitable for this need?
- ABusiness Overhead Expense (BOE)
- BKey Person Disability Income
- CDisability Buy-Sell
- DIndividual Disability Income
Show answer & explanationAnswer & explanation
Correct answer: A. Business Overhead Expense (BOE)
A Business Overhead Expense (BOE) policy is specifically designed to cover the ongoing operating expenses of a business (rent, utilities, employee salaries, etc.) when the owner becomes disabled, ensuring the business can continue to function.
Why the other options are wrong
- B. Key Person DI covers the financial loss to the business from a key employee's disability, not the owner's expenses.
- C. Disability Buy-Sell provides funds for a healthy partner to buy out a disabled partner's share of the business.
- D. Individual DI replaces the owner's personal income, not business expenses.
Business Overhead Expense (BOE) Policy
A type of disability income insurance that pays for the ongoing overhead expenses of a small business if the owner or a key professional becomes disabled.
- Covers rent, utilities, employee salaries, etc.
- Benefits are tax-deductible for the business.
- Benefits received are taxable income.
Memory trick: Business disability policies protect different aspects: operations, ownership, or key people.