Tag Archives: disabled

BOE Insurance

The ability to continue business operations while the business is  disabled can be reassuring to your customers, creditors and employees. Without BOE insurance, you might find yourself using personal funds or taking on debt to meet business expenses.

You might even be forced to close the business. With this coverage, you will be able to keep your business afloat, at least for a period of time. And if you decide to sell your business after becoming disabled, the benefits paid under such a policy can keep your business operating and give you some breathing space to find a suitable buyer.

Business overhead expense (BOE) disability insurance also known as Business Expense Insurance, pays the insured’s business overhead expenses if he or she becomes disabled. A BOE policy pays a monthly benefit based on actual expenses, not anticipated profits. It is designed for businesses that rely on a small number of people (or one person) to produce a revenue.

The owner is reimbursed for existing overhead expenses incurred while he/she is disabled, keeping the company up and running while the owner recovers.

The following business overheads are typically covered by a BOE disability policy:
Rent
Interest payments on some business debts
Utilities
Employee’s salaries and payroll taxes.
Postage and stationery
Equipment maintenance
Rentals, leases, or depreciation of office equipment
Taxes on the business property
Insurance premiums for Workers’ Compensation, employee medical and liability
Accounting fees
Professional membership and subscriptions

Policies do not typically cover the salary of a temporary employee hired to do the duties of the disabled, unless a substitute salary expense or similar rider is purchased with the policy. Income taxes and the cost of inventory are some expenses that are not covered.

Benefit periods: BOE insurance policies have short benefit periods that do not usually exceed two years.

Elimination period: BOE policies typically have short elimination periods; either 30, 60 or 90 days.

Maximum benefits: BOE insurance policies offer a maximum monthly benefit, but only reimburses the policyholder for actual overhead expenses incurred if they, are less than or equal to the maximum benefit. With some insurers, any unused benefit can be applied to increase future monthly maximums or to extend the benefit period.

Taxation: BOE insurance benefits are reportable as income and the premiums are tax deductible as a business expense.

Rates: BOE insurance rates are based on the insured’s age (at time of purchase), occupational duties, health status, optional riders selected, benefit period and elimination period.

Once BOE insurance is owned, coverage cannot be increased without providing evidence of medical insurability, unless a future increase option or similar rider is purchased at the time of policy issue.

You may apply for coverage if you are between ages 18 and 60.
The plan is non-cancelable until you reach the age of 65. After age 65, it is conditionally renewable, as long as you remain employed full-time (minimum of 30 hours per week) and are responsible for the expenses of maintaining an office or business.
Benefits can be paid over a period of time of either 15 or 24 months.
Benefits may start after as few as 15 days of disability.
Premiums may be tax deductible as a business expense.
Various options are available, including the ability to increase your coverage at a later date.
If appropriate, return to work assistance may be provided to support your transition back to work.

THE COST OF BOE INSURANCE

Cost of the insurance will be based on several variables, including your age, sex (women pay higher rates because statistically, they live longer but are more prone to become disabled). The risk category of your profession, your medical background, whether you smoke, and, of course, the coverage you need. Obviously, you will pay more for a policy that pays $15, 000 a month for two years than a policy that pays $5, 000 for six months. Your payments will rise as you age. The policy that is dirt cheap in your 30s could cost you a fortune in your 60s.

Premiums run between $2, 000 and $10, 000 a year, for coverage between $50, 000 and $75, 000 a year.

The best policies on the market are those that are noncancellable and guaranteed renewable. With that policy the carrier can never ever change any provision of the policy regardless of how many times an insured person files a claim. If the policy is only guaranteed renewable, you cannot be dropped, but the insurance company can raise the premium.

How to Buy Disability Insurance

Without disability insurance, disability can be a financial disaster for you and your family. If you become disabled during your working life, you lose your earning power, but you can continue to have the same living expenses along with mounting medical costs. If you decide to purchase disability insurance, ask the following questions to make sure you get the coverage you need. If you ever become disabled, the right disability insurance policy can help you avoid financial ruin while you recover your health.

How does the disability insurance plan define disability?

Some disability insurance policies consider you disabled only if you are unable to perform the duties of any job, which means you may not be eligible for disability benefits if you can still manage a low-skill, low-wage job. Better disability insurance plans pay benefits if you are unable to perform the duties and fulfill the responsibilities of your usual occupation.

When do disability insurance benefits begin?

Most plans have a waiting period after an illness and before payments begin. Your waiting period will depend on your policy. Your first disability payment can range from 60 days to a year depending on your policy’s particular waiting period. If you are able to choose your waiting period and would like a lower disability insurance premium, you will want to choose a longer waiting period.

Disability Coverage Options:

  • Any Occupation: This definition is more restrictive as benefits are only paid if the insured is unable to perform the duties of any gainful occupation for which he is suited by education, training or experience. Several sites have more information on disability insurance decision points.
  • Partial Disability: Under this policy benefit, the insurer pays a benefit when the insured is only able to return to work (as authorized by his doctor) in a partial capacity. The concept is that an insured who is able to perform some, but not all of the duties of his occupation, is entitled to some benefits.
  • Residual Disability This benefit encourages employees to return to work, at least part-time, following an injury or illness. A residual disability is one that results in the inability for an insured to perform some of the duties of her own occupation full-time, leading to a loss of income and therefore a benefit is paid. Be aware, however, that even long-term disability may not last as long as the client might expect. The typical length of a disability claim is two and a half years. It is in the insurer’s best interests to do whatever they can in terms of rehabilitation and job training, to move beneficiaries back to work. And though Cadillac policies (Informally, a Cadillac plan is any unusually expensive health insurance plan, usually arising in discussions of medical – cost control measures in the United States) offers “own occupation” coverage meaning that the client will receive benefits unless they are able to go back to work in your chosen field – many employer – paid plans only cover “own occupation” benefits for the first two years.  After that you will be expected to try to find work in any field.

How big a benefit can you collect?

It is typical now for companies to pay for long term coverage that would pay workers 50 percent or 60 percent of their income, and to allow workers to pay for another 10 or 20 percent of their monthly benefit.  But be aware that many policies also limit total monthly coverage – the median weekly maximum is $1,154 according to Mercer. Clients may need more money than that, especially because Mercer reports that two in five employers will kick you out of their health insurance plan while you are out on disability. The disability income insurance should cover 60% of the individual’s salary.