Business Overhead Expense and Buy-Sell Disability

Business Overhead Expense

As a business owner with a company to run, you know how difficult it is to get away. What happens if you become too sick or hurt to work? Could your business stay open while you
were gone? Would the business be able to continue paying the bills if you weren’t working? You can help protect your business should you become too sick or hurt to work. Overhead
Expense (OE) insurance helps:

• Keep your business running while you recover from a disabling injury or illness
• You have a financially sound business to sell, should you need to do so

How it works

Policy reimburses you each month for fixed overhead expenses while you’re totally disabled and unable to work.

  • It covers expenses such as rent or mortgage, utilities, employee salaries and much more.
  • If your covered expenses differ from the monthly benefit amount, you may carry forward unreimbursed expenses or unused benefits to a later month during your disability.
  • The premiums are tax-deductible and benefits received are reportable as income.
  • Although benefits are taxable as income, the actual business expenses are deductible.


  • Helps pay the bills associated with running your business, so you don’t need to dip into assets
  • Can mean the difference between staying open and closing your doors
  • Maintains goodwill with customers, vendors and creditors
  • Helps retain business value

With certain carriers, you can also add a Business Loan Protection rider.
The Business Loan Protection (BLP) rider covers loans taken out for business-related expenses, such as:

Purchase or expansion of a practice or business
Purchase of expensive equipment
Facility renovations
An increase in working capital or build-up of inventory
In the event of a total disability, benefits can be assigned to the financial institution holding the loan. This rider offers guaranteed premium rates until the client reaches the loan termination date. It cannot be conditionally renewed beyond the age 65 policy anniversary.

Types of loans considered for coverage: Term, variable rate, commercial mortgage and lease financing

  • Issue ages: 18 to 60
  • Occupation classes: 3A/3A-M and above
  • Elimination Periods: 30, 60, 90, 180 or 365 days
  • Benefit amount: Based on loan obligation, up to $20,000 per month
  • Benefit maximum: Up to $2 million
  • Benefit period: End of the financial obligation or earlier (three-year minimum)

Buy-Sell Disability or Disability Buy-Out

Disability Buy-Out (DBO) insurance helps fund the purchase of a totally disabled business owner’s interest under a buy-sell agreement. It allows remaining owners to continue the business without:

  • Using business cash flow
  • Obtaining loans from financial institutions
  • Selling shares of the business to get working capital

The policy is conditionally renewable to age 65 with guaranteed premiums.

Disability Income Insurance policies have limitations and exclusions. Features and costs vary by insured’s occupation, age, health and state of residence. For costs and complete details of coverage, contact your personal insurance broker/agent. The information presented here is not specific to any individual’s personal circumstances and is provided for general information and educational purposes based upon publicly available information from sources believed to be reliable. We cannot assure the accuracy or completeness of these materials. The information in this article may change at any time and without notice.