Overhead Expense

Are You Risking Your Business...(Part 2)?

Would it surprise you to know that you may be your company's single greatest risk? If you are the primary income driver, what happens if you suffer a disabling illness or injury and cannot work for a while (or perhaps permanently)?

Who drives the income necessary to keep the lights on, make payroll, pay vendors, and a host of other expenses that continue even when you can't work? Business Overhead Expense Plans provide coverage for the expenses of your business while you are out. These plans give you the time you need to recover or execute your disability buy-sell agreement provisions if you cannot return to work in the future. Reassure your employees and creditors of the continuity of your business. Let us help you keep the doors open following a disabling injury or illness.

What Types of Expenses are Covered?

Covered expenses include those that are tax deductible to the business. The insured's salary, salaries of co-workers who perform the same duties as the insured, salaries of family members, and depreciation are typically not covered but may be via a custom policy rider.

  • Employee Wages (non-owner)
  • Payroll Taxes
  • Rent
  • Utilities and Phone
  • Equipment Leases
  • Building Expense
  • Interest Expense
  • Equipment Expense
  • Advertising
  • Computer Supplies
  • Dues & Subscriptions
  • Employee Benefits
  • Employee Retirement Plans
  • Office Insurance Plans
  • Legal & Accounting Expenses
  • Office Supplies Expense
  • Repairs & Maintenance Expense

Who Receives the Expense Reimbursements from the Insurance Company?

Benefits are payable to your business and are taxable upon receipt. In as much as the benefits received are used to fund ongoing deductible business expenses, the net tax effect is neutral.

The premiums paid to the insurance company for the overhead expense policy are generally tax deductible as a business expense.

When Do Benefits Start?

That depends on the elimination period you choose. The elimination period (time you must be totally disabled before benefits begin) will depend on several factors including: your premium budget, your type of business, your receivables history, the cash flow requirements of the business, and other underwriting factors related to your specific industry. In many cases, we see 30 day elimination periods while other businesses feel they can afford a 60 or 90 day elimination period.

How Long Are Benefits Paid?

That depends on the policy benefit option you elect. Generally speaking, the benefit duration will be either 12, 18, or 24 months. At the end of the benefit period, it is assumed you will sell your business interest under your insured buy-sell agreement funded by a separate disability buy out policy. It is further presumed you have kept your buy sell agreement up to date with the current market value of your business through annual reviews with your business advisor(s).

Have a Question?

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