Disability Insurance & Business Overhead Expense (BOE)
1. Setting the Stage – Commercial Overhead Costs
- Commercial lease costs for business owners typically range from $40 to $150 per square foot per year.
- Many business owners are locked into leases for 3 years or longer.
- If they cannot work due to illness or injury, these expenses do not stop.
- Without a plan, covering these fixed obligations can be extremely difficult.
2. Why We’re Here
- Today’s focus: The importance of living benefits for business owners.
- We’ll cover:
- Expense reimbursement options for business owners.
- Income replacement strategies.
- Sample case studies to help you identify prospects in your client base.
3. Life Doesn’t Always Go as Planned
- In a perfect world, we are healthy, working, earning a steady income, and moving toward our personal and business goals.
- But unexpected events—illness, accidents, or even premature death—can disrupt everything.
- Example: My brother’s severe car accident last year. Doctors estimated it would take 4 years to reach even 70% recovery—not 100%.
- A single event can instantly affect both personal and business income.
4. Disability Risk by Age
- At age 35 to 40, individuals are 3.5 to 4 times more likely to suffer a long-term disability than to die prematurely.
- Average disability duration after 90 days is about 3 years.
- Question for every business owner:
“Are you prepared to cover your obligations if you can’t work for several years?”
5. Personal vs. Business Financial Obligations
Personal obligations:
- Mortgage
- Children’s education
- Retirement savings
- Daily living expenses
Business obligations:
- Business mortgage or rent
- Employee salaries
- Utilities
- Property taxes
- Insurance premiums
- Equipment leases
Key difference: Business owners must handle both sets of obligations at the same time.
6. Case Study 1 – Andrew the Baker
- Age: 40
- Employees: 3 (including a working manager)
- Andrew suffers an illness or injury and cannot work.
- Without him, production slows, customers may turn to competitors, and fixed expenses continue.
- Question: Where will the money come from to cover business costs until he returns?
7. The Solution – Business Overhead Expense (BOE) Insurance
- Reimburses fixed monthly business expenses if the owner is disabled.
- Waiting period options: 15, 30, 60, or 90 days.
- Benefit period: 15 or 24 months.
- Maximum monthly benefit: $40,000.
- Non-cancellable and guaranteed renewable for life (as long as the owner works at least 30 hours/week).
Key Features:
- Partial Disability Benefit – Pays if the owner can perform some duties but not all.
- Accumulation & Extension Benefit – If actual expenses are lower than the insured amount, unused benefits are banked and can be used later during the claim period.
- Tax-deductible premiums – Premiums are paid by the corporation and are deductible as a business expense.
- Benefits paid to the corporation – Counted as business revenue to cover fixed expenses.
8. Case Study 2 – Aruna the Accountant
- Age: 48
- Status: Non-smoker, incorporated for 2 years, has 1 assistant.
- No group disability insurance – needs both BOE and personal income protection.
- Income:
- $60,000 T4 salary
- $169,000 corporate net income before taxes
- +$40,000 perk allowance
- Total insurable income: $269,000
Recommended Coverage:
- Professional Series individual disability insurance:
- 90-day waiting period, to age 65
- $10,525 monthly benefit
- Own Occupation definition, Future Income Option, and Cost-of-Living Adjustment
- BOE Insurance for fixed business expenses.
