Business overhead expense insurance, also known as business expense insurance, is an insurance policy typically designed for business owners who are unable to manage the daily operations of their business as a result of an illness or a form of disability.
It reimburses business owners for any business expenses incurred during the time they were sick, ultimately providing financial security and peace of mind to the business owner.
Business overhead expense insurance is way different from personal disability insurance. While the former provides coverage for all business expenses when there’s a disability or illness that requires a business owner to be absent temporarily, the latter makes payments directly to the business owner in order to replace the lost income in a case where they’re unable to work.
Business overhead expense insurance is highly recommended to business owners who seek long-term financial coverage for their businesses.
We all know there are financial repercussions that occur when a business is managed poorly. That is why business expense insurance is there to serve as a safeguard in situations like this.
What Does Business Overhead Expense Insurance Cover?
There are several expenses covered by business overhead expense insurance. Everything you are unable to pay for as a business owner will be covered by this insurance. When you get business expense insurance, it offers coverage for:
- Debt
- Dues and fees.
- Insurance premiums
- Office-related expenses such as rent, utilities, equipment, maintenance, laundry, and others. .
- Property taxes
- Employees’ Wages
- Custodial/replacement services
Business overhead expenses insurance ensures that all of these expenses are duly covered, offering the business owner peace of mind and less financial burden.
What Does Business Overhead Expense Insurance Not Cover?
Although business overhead expense insurance covers quite a large number of expenses associated with effectively running your business while you’re away, there are certain exclusions as well. Business expense insurance will not cover
- Your salary
- Salaries of employees hired after you become sick
- Any of your business partners’ salaries
- It does not cover your business’s profits.
- Expenses covered by other sources, such as inventory costs
- Changes made to the office space after you became sick or injured
Business expense insurance will only cover the wages of your employee and not yours. So, it is important to compare quotes and seek professional consultation from your insurance provider in order to get a better understanding of its coverage and limitations.
What Are the Eligibility Criteria for Business Overhead Expense Insurance?
The eligibility criteria largely depend on the insurance provider you intend to get the business overhead expense insurance from. However, we have highlighted the general eligibility requirements below:
- Business owners must be between 18 and 64 years old.
- He or she must meet the specified amount of revenue.
- Also, you must have been in business for a minimum of two years.
If you meet these eligibility requirements, then you are qualified for business expense insurance.
Pros of Business Overhead Expense Insurance
Having this kind of insurance will offer advantages and disadvantages. Outlined below are some of the benefits of business expense insurance:
- Your business will continue to thrive even in your absence.
- Significant business expenses will be covered by the policy benefits.
- It preserves your business’s cash reserves.
- It gives you the opportunity to retain outstanding employees who contribute greatly to your business.
- It helps to desecrate the chances of touching your personal savings to cover business expenses.
- A renewable policy that guarantees continuity as long as you pay your premiums.
- Premiums paid for coverage may be tax-deductible.
Cons of Business Expense Insurance
While we consider the benefits of business overhead expense insurance, it is also important to point out its downsides. The disadvantages of this insurance include:
- Benefits may be considered taxable income for the business.
- The coverage usually has a time limit, meaning benefits can’t be paid indefinitely.
- You may need separate disability coverage as the policy won’t pay the benefits to you directly.
- You may be limited to a maximum monthly benefit, which can be less than the amount needed to continue your business operations.
You will agree with me that the advantages outweigh the disadvantages. Hence, we think it is a safety net for business owners if they become sick or severely injured.
FAQs
How long will business overhead expenses insurance pay benefits?
Business overhead expenses insurance is specifically designed to cover the cost of temporary disability policies; they provide benefits usually between 12 and 24 months after the claim.
Thus, giving business owners more than enough time to recover and make other arrangements needed for their business to keep thriving, they could decide to hire a replacement worker or sell the business pending the time they recover.
Should business owners have both business expense insurance and disability insurance?
In our sincere opinion, we recommend getting both business overhead expenses and disability insurance, owing to the fact that there are two different entities, which means that the coverage options differ. What disability insurance covers is entirely different from what business overhead insurance covers.
While your disability insurance replaces your income in a situation where you’re unable to work, it does not provide any business-specific protections. Therefore, we advise that you should get both insurances to protect yourself and your business.
How much does business expense insurance cost?
The cost attached to getting business expense insurance largely depends on a few factors, such as the insurance provider, business revenue and expenses, your age, the coverage you chose, as well as other factors that could adversely have an effect on the cost.
Since business overhead expense insurance offers more coverage and benefits than personal disability insurance, it is most likely to be expensive.
