Quick answer: Business overhead expense (BOE) insurance reimburses a business for fixed operating costs — rent, staff salaries, utilities, equipment leases, loan payments — when the owner becomes disabled and cannot work. It's separate from personal disability insurance, which replaces your income. BOE keeps the lights on and employees paid so the business survives while you recover.
What BOE Insurance Covers
A BOE policy typically covers documented, fixed monthly business expenses including: office rent or mortgage interest, employee salaries and benefits, business loan payments, utility bills, professional fees, business insurance premiums, and equipment leases. It does not cover the owner's personal salary (that's what personal disability insurance is for), nor does it cover business profits or variable costs. Coverage limits are based on your actual monthly overhead — typically $15,000 to $30,000/month for small professional practices. Benefit periods are usually 12 to 24 months, reflecting how long it takes to recover, hire a replacement, or arrange a sale.
Why Business Owners Need It Separately from Personal Disability
Your personal disability policy replaces your take-home income — not the $20,000/month you need to keep three employees paid and the office lease current. Without BOE coverage, a disability forces an impossible choice: drain personal savings to pay business bills, let employees go, or default on leases. Physicians, dentists, attorneys, accountants, and any professional whose business requires their direct presence are the primary buyers. A two-year disability at age 45 without BOE coverage could mean returning to an empty office with no staff and terminated equipment leases, while still owing back rent.
Cost and How It's Structured
BOE premiums are tax-deductible as a business expense — unlike personal disability insurance premiums. However, the benefit payments you receive are treated as taxable business income, which offsets the deductible expenses (net tax effect is typically neutral or slightly favorable). Premiums vary by age, health, occupation, and monthly benefit amount — expect $200–$600/month for a $10,000/month benefit. Most policies use an "own-occupation" definition of disability for professional practices. Work with a disability insurance specialist to coordinate BOE coverage with your personal DI policy for complete protection.
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