Business Overhead Expense insurance, also known as BOE, is disability insurance that pays monthly payments to cover business expenses so your business can continue to operate smoothly if you become disabled.

Who can get BOE?

To qualify for BOE, you’ll need to show a certain amount of revenue and typically need to be between the ages of 18 and 64. You also need to have been in business for at least two years. If you work from home, insurance companies usually don’t let you take out BOE insurance.

What does BOE cover?

It covers a range of “usual and customary” business expenses like:

  • Wages – Payroll and contributions for benefits, but it does not cover the owner’s compensation, which is generally covered by a separate policy.
  • Payroll taxes
  • Office expenses – including utilities, equipment, custodial services and laundry services.
  • Dues and fees – including licensing fees and professional and trade dues.
  • Debts – including paying for accounting, billing, and collection services. It can also pay the cost of making installment payments on debt your business had prior to your disability.
  • Real estate – including your office’s rent or mortgage. Associated property taxes should also be covered.
  • Insurance premiums – Your property and liability insurance premiums are covered. If you subsidize your employees’ life insurance or disability insurance coverage, those premiums could also be covered as contributions to benefits.

How long do you have to wait to receive benefits?

BOE policies generally have short waiting periods or “elimination periods,” often no more than a month, so that operating expenses can begin to be covered right away. Choosing a longer elimination period means you’ll save money, but there’s a higher chance you’ll recover from an injury or illness before the insurance company must pay benefits.

How much does BOE insurance pay?

Quality BOE insurance coverage should pay 100% of your monthly operating expenses up to your maximum monthly benefit amount.

When you receive benefits, if you had lower expenses in one month, your unused monthly benefits can roll over to the next month. For example, over a 2 month period, if your base monthly benefit is $20,000 per month, but you only used $18,000 the first month, then your BOE insurance can pay up to $22,000 in expenses the next month.

How long do benefits last?

The benefit period should be long enough to cover the business for an extended disability and to determine if the owner will be able to return to the business in, for example, one to two years.

Are there tax advantages with BOE?

Yes! Premiums are tax deductible, but benefits are taxable.

What’s not covered by BOE insurance?

  • Your own wages and profit or those of people who pay a portion of your business expenses. You need to have your own individual disability insurance policy to cover your wages.
  • The wages and profit of any of your relatives, unless they were employed by your company 60 days or more before your disability.
  • Costs that are covered by another source, including those passed on to customers.
  • Additions to the office space, including furniture and renovations, paid for after your disability.
  • Circumstances like fighting in a war, committing a crime, or self-inflicted harm.

The Bottom Line

BOE insurance helps pay for business expenses if the business owner becomes disabled. Running a business is challenging, even when you’re healthy. Your business probably relies on you, so it makes sense to protect it and your family from your inability to work due to a disability.