What Is Business Overhead Expense (BOE) Insurance?

If you own a business, you likely pay overhead each month to keep it running. Overhead expenses include items such as rent, taxes, utilities, equipment maintenance, and employee salaries.
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Business Overhead Expense

Written by Brian Greenberg

Last updated: September 19th, 2022

Reviewed by Paige Geisler

If you become disabled and can’t run your business for a period of time, many of these overhead expenses still need to be paid, even though your business isn’t earning the same revenue. Business overhead expense insurance will cover these expenses until your business is running at full speed again.

What is Business Overhead Expense Insurance?

Business overhead expense insurance (BOE) is a type of insurance that helps protect your business if you become disabled and cannot work, resulting in lost revenue. It can help to cover costs such as employee wages, office expenses, rent, and insurance. In order for BOE insurance to provide coverage, your business must meet certain requirements, including having an established business operation for at least 2 years and earning adequate revenue. Your agent can discuss what conditions their company specifically requires.

Who Can Qualify for Business Overhead Expense Insurance?

There are a few general requirements to qualify for business overhead expenses insurance. Typically, an insurance company needs the following conditions to be met:

  • You’re older than 18 but younger than 65, though you can often renew the policy upon turning 65 if you’re still working.
  • Your business has been in operation for at least 2 years.
  • Your business earns consistent revenue. Brand-new startups may find it difficult to obtain BOE insurance.
  • Your business has a dedicated physical location and isn’t a work-from-home operation.

However, these policies are not always set in stone, and every insurance company has different rules. You should talk to a reputable broker about your situation; they may be able to find a policy that works for you.

How Much Does Business Overhead Insurance Pay?

You can set your coverage amount when you purchase a policy, but ideally, business overhead insurance should cover 100% of your company’s overhead expenses each month. Anything short of that and you risk being unable to pay your bills.

A nice feature of many BOE policies is that if your expenses are lower than usual one month, the leftover amount the policy doesn’t have to pay gets carried over to the next month. So, if you have $15,000 per month worth of coverage, but your expenses only come to $14,000 one month, the extra $1,000 gets carried forward in case your business encounters an unexpected overhead expense at some point.

How Long Does Business Overhead Insurance Last?

You can choose the benefit period when you buy BOE coverage, but it’s generally offered for periods between 12 and 30 months in 6-month increments.

What is Covered by Business Overhead Insurance?

Business overhead insurance covers expenses that are necessary for the continuance of the business. These include:

  • Employee wages
  • Rent
  • Taxes
  • Insurance premiums
  • Office expenses
  • Professional licensing fees
  • Debt servicing payments

What is Not Covered by Business Overhead Insurance?

Business overhead insurance usually doesn’t cover your wages or those of your family members who work in the business. It also doesn’t cover items not considered essential to keeping your business running, such as marketing and advertising costs and additions to your office space. It won’t cover any losses to property or liability claims as well. These types of losses require different policies. BOE insurance is designed solely to protect the business from failing if the owner or key employee cannot perform their normal duties necessary to the functioning of the business.

Is Business Overhead Insurance Tax-Deductible?

As with most insurance, the premiums you pay for BOE coverage are usually tax-deductible, but the benefits you receive in the event of the claim are taxed as income. If you use those benefits to pay expenses, though, the expenses themselves may be tax-deductible. A concrete way to make sure you’re claiming your insurance and expenses correctly on your tax return is by asking your tax preparer. Many insurance brokers won’t know the implications of taxes on BOE insurance, so always speak with a licensed tax professional.

Where Can You Get Business Overhead Insurance?

You can get business overhead insurance from your current agent, a local broker, or an online source. Just be sure to ask a lot of questions and read the policy carefully before signing because they’re not all the same. You want to be sure your BOE policy will pay the overhead expenses you need to keep your business running while you’re away.

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