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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
expense.
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
"wash."
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 benefit.
Monthly benefit:
$10,000.00
Monthly premium:
$65.25
Includes both
the Carry-over Provision and the Optional
Residual
Rider. | 
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