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Disability Insurance Business Overhead Expense


Standard vs. Professional Business Overhead Expense Disability Insurance

Disability insurance business overhead expense  provides reimbursement for the expenses of operating your business if you are disabled and cannot work. These expenses may include mortgage payments or rent, electricity, telephone, heat, water, laundry and other fixed costs normal to the operation of the practice.
Professional overhead expense disability insurance, on the other hand, pays some additional costs including the salaries of all
regular employees except those who are members of your profession. In a medical partnership, for example, salaries for the receptionist and nurse would be covered, but not the salary of your physician partner or employee. However, high-quality professional overhead policies will cover at least part of the salary of a professional temporary replacement for you, such as a doctor retained to fill in during total disability.

Look for These Features in Your Coverage

Here are some of the extras you can find in high-quality professional overhead expense policies:

The Carry-over Provision... To accommodate fluctuating monthly expenses

      Overhead expense benefits reimburse the expenses incurred in keeping your office open during your disability. However, in many practices these expenses fluctuate, so one month they might be less than the policy benefit, other months more.

Building a carry-over provision into the policy solves this
problem. When monthly expenses are less than the maximum monthly expense benefit, the unused benefits are simply carried over and made available for use in months when expenses exceed the maximum monthly benefit. Under certain conditions, overhead expenses may actually continue to be reimbursed even beyond the indemnity period.

The Residual Rider... To cover partial disability

      If you suffer a disability that limits you to part-time work, your practice's gross revenue may decrease to the point where you cannot meet your office expenses. In such a case you would certainly need help to pay your office bills, just as you would if you suffered a total disability. Yet many overhead expense policies require you to be totally disabled to be eligible for benefits.

To avoid this problem, look for an optional policy provision
for what are called "residual benefits" paying the difference between current gross revenue and current expenses if you are partially disabled. These benefits are payable when your practice's monthly expenses exceed gross income and you have lost at least 20% of your prior gross monthly revenue.

Future Purchase Option... To help benefits keep up with inflation

As your practice grows, expenses are bound to increase, sometimes to the point where they can no longer be handled by your POE coverage. One very valuable optional provision to help with this is a "future purchase option" giving you the right to increase coverage each year, without proof of medical insurability, until age 55.

Coverage for all reasonable expenses

With a high-quality policy, more expenses are eligible for
reimbursement during disability than with more standard policies. When you're evaluating plans, check
to make sure the following are covered:

Both principal and interest on your practice's mortgage payments

• Cost of equipment leased or purchased prior to disability

• Up to 80% of salary for a qualified replacement for you for up to six months

• Depreciation or scheduled installment payments of principal and interest on debts

Tax Considerations

        Professional Overhead Expense Insurance offers several tax advantages to your practice:

Premium payments are tax-deductible as a reasonable business

Overhead expense benefits received during disability, while taxable upon receipt, are used to pay practice-related expenses which are tax-deductible. The net tax result is a

Affordable Protection for Your Practice

      The good news is that quality Professional Overhead Expense coverage is both available and surprisingly affordable... especially when compared to other monthly services you already pay for.

      An Example of Cost
      Overhead Expense Policy for a 40-year-old male

       Male, age 40; non-smoker; top occupation class; 90-wait, 12-month

Monthly benefit:                   $10,000.00
       Monthly premium:                      $65.25

       Includes both the Carry-over Provision and the Optional Residual Rider. 

Related Topics
                Business Disability Products

  Professional Business Disability Overhead Expense
                  Disability Buy Out  
                  Disability Buy Out Insurance
                  Keyman Disability insurance  
                  OTHER PROFESSIONALS
  Employer Groups

Not all insurance products from all insurance companies are available in all states.

Note:  We do not provide legal or tax advice. The general information presented on various tax aspects contained in this site are not intended to be relied upon as tax advice. Individuals should seek the advice of a qualified tax professional regarding the taxation of these benefits as they apply to your particular situation.  These benefits are offered in all states except: AK, HI, & WY. License #'s: CA: OC38446 MT: 29724 F00-0283-LC 

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