Man using calculatorMany small business owners and entrepreneurs understand the importance of protecting their own personal income but neglect to ensure the proper care of their business against a long term disability. Sadly, many successful businesses fail when the CEO cannot work because of a sickness or injury, causing their business's overhead costs to accumulate past a point of financial viability.

It benefits them not only to seek individual disability insurance for their personal income but also coverage for their business expenses as well. This type of coverage usually is referred to as Business Overhead Disability Insurance. Here is a basic outline of how such a policy works:

  • Covered deductible overhead expenses are;
    • Rent

    • Utilities

    • Insurance Premiums

    • Employee Salaries

    • Equipment Lease Expenses

    • Interest on Debt

    • Any other deductible normal overhead expenses

  • The policyholder's share of covered expenses will be reimbursed up to a maximum monthly benefit shown on the policy.

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All overhead policies have many options to meet the needs of each individual. Most have choices of how long the insured needs to wait until the insurance company pays its first monthly benefit (just like their individual income policy).

The most common choices are 30 days, 60 days, & 90 days. These are defined as ‘waiting’ or elimination periods

30, 60, 90 Day Infographics




It is much the same with benefit periods (time the benefit is paid out for a disability). There are three common selections of 12, 18, & 24 months. Unlike individual income disability policies that offer a ‘to age 65’ or ‘lifetime’ benefit, overhead disability policies max out at a two-year benefit, as most individuals will know whether or not their business will continue past that point.

Protection of the business expenses allows the disabled person valuable time to assess the effects of what their disability may have on the future of their business and to plan accordingly. If this is something you may have overlooked and would like more information about just give us a call.



This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.

Individual disability insurance policy forms 4200 and 18OE are underwritten and issued by Berkshire Life Insurance Company of America, (BLICOA) Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America, New York, NY. Product provisions and availability may vary by state. In New York: This policy provides disability insurance only. It does not provide basic hospital, basic medical, or major medical insurance as defined by the New York State Insurance Department. For policy forms 4200 and 18OE, the expected benefit ratio is 50%. For policy form 18OE-F, the expected benefit ratio is 60%. The expected benefit ratio is the portion of future premiums that the company expects to return as benefits when averaged over all people with this policy form.

The Importance of Business Overhead Expense Disability Insurance

By : Bill Olmsted

(301) 970-4616

2024-175201 Exp: 5/30/26