1. 24 - 1Copyright 2008, The National Underwriter Company Business Overhead Expense (BOE) Insurance  What is it?  Pays the ongoing operating expenses of a business if the business owner becomes disabled (i.e., a business disability policy)  When it the use of this tool indicated?  Especially useful when business relies heavily on a single individual  With more than one individual in business, may pay portion of expenses Chapter 24 Risk Management For Financial Planners

2. 24 - 2Copyright 2008, The National Underwriter Company  Tax Implications  Premiums paid generally deductible as business expense  Proceeds are taxable income, but may be offset by deductions for expenses paid with proceeds Chapter 24 Risk Management For Financial Planners Business Overhead Expense (BOE) Insurance

3. 24 - 3Copyright 2008, The National Underwriter Company  Design Features  Benefit Periods  Typically fairly short benefit period (i.e., two years)  Waiting Period  Tends to be fairly short (i.e., 30 days)  Maximum Benefits  Typically pays actual expenses up to stated monthly amount  In some policy, unused amounts may be carried over month to month Chapter 24 Risk Management For Financial Planners Business Overhead Expense (BOE) Insurance

4. 24 - 4Copyright 2008, The National Underwriter Company  Design Features (cont’d)  Covered Operating Expenses  Salaries  Legal fees  Employee benefit costs  Business insurance premiums  Rent or mortgage for  Depreciation on business business propertyproperty  Utilities  Janitorial services  Property taxes  Office supplies  Accounting fees  Interest on business debt Chapter 24 Risk Management For Financial Planners Business Overhead Expense (BOE) Insurance

5. 24 - 5Copyright 2008, The National Underwriter Company  Alternatives  Self-insurance may be difficult  Borrowing money / Line of credit  Close the business Chapter 24 Risk Management For Financial Planners Business Overhead Expense (BOE) Insurance