Running a business is like steering a ship through ever-changing tides. Smooth sailing one moment, rough waters the next. But what happens when the captain—the business owner—is unable to navigate due to illness or injury? That’s where a Business Overhead Expense (BOE) policy becomes a lifeline. This often-overlooked insurance product can help keep your business afloat during turbulent times.
In this article, we’ll break down what a BOE policy is, why it’s essential for small business owners, what it typically covers, and how to choose the right policy for your needs.
What Is a Business Overhead Expense Policy?
A Business Overhead Expense policy is a type of disability insurance designed specifically for business owners. Unlike personal disability insurance, which replaces lost personal income, a BOE policy reimburses a business for fixed operating expenses when the owner is temporarily disabled.
Key Characteristics of a BOE Policy
- Short-term coverage: Typically pays benefits for up to 24 months.
- Reimbursement model: Covers actual, documented expenses rather than providing a lump sum.
- Focus on fixed costs: Only covers expenses necessary to keep the business operational.
Why Business Owners Need BOE Insurance
Entrepreneurs and small business owners are the backbone of their operations. If you’re sidelined due to an illness or injury, your absence can put your business at risk. A BOE policy ensures that essential expenses are paid, giving you time to recover without the added stress of mounting bills.
Key Benefits
- Business continuity: Keeps operations running during your temporary absence.
- Protects employees: Helps you continue paying salaries and retain talent.
- Preserves business value: Maintains your business’s reputation and client relationships.
What Does a BOE Policy Cover?
A BOE policy typically reimburses the following fixed overhead expenses:
- Rent or mortgage payments for your business premises
- Utilities, such as electricity, water, and internet
- Employee salaries and benefits (excluding the owner’s income)
- Accounting and legal fees
- Property taxes and insurance premiums
- Depreciation of business property
- Office supplies and maintenance
Note: BOE policies do not cover the owner’s lost income. For that, you’d need individual disability insurance.
How to Choose the Right BOE Policy
When shopping for a BOE policy, it’s important to tailor coverage to your business’s unique needs. Here are key factors to consider:
1. Monthly Benefit Amount
Estimate your average monthly overhead to determine how much coverage you need.
2. Elimination Period
This is the waiting period before benefits begin. Shorter periods mean faster payouts but may come with higher premiums.
3. Benefit Period
How long will the policy pay out benefits? Common options range from 12 to 24 months.
4. Covered Expenses
Review the policy to ensure it includes all the essential expenses your business regularly incurs.
5. Premium Cost
Balance affordability with the level of coverage you need. Sometimes, a slightly higher premium can offer significantly better protection.
Who Should Consider BOE Insurance?
While any business owner can benefit, BOE policies are especially important for:
- Sole proprietors and partners in small businesses
- Professionals with high fixed costs, such as doctors, dentists, and lawyers
- Entrepreneurs without a strong managerial team to take over during absences
BOE Insurance vs. Personal Disability Insurance
It’s easy to confuse BOE insurance with personal disability insurance, but they serve very different purposes:
| Feature | BOE Insurance | Personal Disability Insurance |
|---|---|---|
| Covers | Business expenses | Personal income |
| Benefit Duration | Up to 24 months | Up to retirement age (in some cases) |
| Who it’s for | Business entity | Individual |
Having both policies in place provides comprehensive protection for both your livelihood and your business.
Conclusion: Secure Your Business’s Future
A Business Overhead Expense policy isn’t just an optional add-on—it’s a crucial part of your risk management strategy. When the unexpected happens, it can mean the difference between closing your doors and keeping the lights on.
If you’re a small business owner, talk to an insurance professional about BOE insurance. Evaluate your overhead expenses, assess your risks, and take steps to protect what you’ve built. Your business—and your peace of mind—are worth it.
Josiah Sparks is a business writer and strategist, providing expert insights on management, leadership, and innovation at management-opleiding.org to help professionals thrive. His mission is to empower professionals with practical knowledge to excel in the ever-evolving business landscape.
