How is Business Overhead Expense Insurance Different Than an Individual Disability Policy?

Chicago Insurance Attorney

If your business is covered by private business overhead expense (BOE) insurance, you may be wondering how a claim brought under the BOE insurance plan differs from a disability benefits claim.  Business overhead expense insurance is a unique and somewhat non-standard form of insurance that covers small and medium-sized businesses in the event that a valuable individual — typically the owner, but sometimes a different employee within the company — is disabled and therefore can’t work for the company.  The benefits payout from a BOE insurance plan can help a business survive until the disabled employee recovers and reintegrates into the workplace.

Understanding the Role of Each Type of Insurance Coverage

Standard disability insurance coverage (disability income insurance) is designed as a salary replacement in the event that an individual is rendered incapable of working for a given length of time, whether temporary (short-term or long-term) or permanent in nature.  Disability insurance pays out a benefit amount that is either a flat, agreed-upon rate (i.e., $5,000 per month for a premium plan) or is based upon one’s pre-existing income standard.

For example, if you are a white collar professional earning $9,000 per month, then your monthly disability benefit might be equivalent to 2/3 of your total monthly income, or roughly $6,000 per month.

By contrast, BOE insurance coverage is meant to cover the overhead costs of running a business during the length of time necessary for the target disabled individual to recover from their disability and return to work.  BOE insurance coverage pays a benefit to the business, not the individual.  It is intended to account for the value of a particular employee to the overall business.

In an early stage business, the CEO (who may wear a variety of “hats,” such as lead salesperson and manager) is often the target of BOE insurance coverage.  Should this individual become disabled, the continued existence of the business could be put in serious jeopardy — as such, BOE insurance coverage can cover the costs and allow the business to stay afloat until the target individual recovers.  In the alternative, it may be possible for the business to find a suitable replacement after some time.

BOE insurance typically lasts for only a short while — between two to four years, though lengthier coverage periods are not unheard of.  The benefits payout, unlike that of standard individual disability insurance coverage, is based on the overhead expenses of the business itself.  These expenses may include rent, utilities, maintenance, payroll, and more.

Contact an Experienced Chicago Insurance Attorney for Comprehensive Legal Guidance

Bryant Legal Group, P.C. is a boutique insurance litigation firm with decades of experience representing policyholders — including business overhead expense insurance policyholders and disability policyholders — in challenging disputes with their insurance carriers.

We have worked tirelessly over the years to provide comprehensive and client-oriented legal representation.  We work closely with our clients to learn about their particular goals, preferences, and limitations, which gives us the insight we need to tailor our advocacy appropriately.  This personalized approach to legal representation has helped us obtain numerous successful verdicts, settlements, and administrative resolutions on behalf of our clients.

Ready to speak with an experienced Chicago insurance attorney about your business overhead expense insurance claim?  Call (312) 634-6160 or send us a message online to connect to an attorney here at Bryant Legal Group, P.C. today.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.

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