Self-employed individuals are great candidates for disability insurance. Many of them have an income worthy of protection, but they don’t have access to employee benefits, so they need to buy their own disability coverage. But should you also offer them business overhead expense (BOE) insurance? The answer is… sometimes.
Self-employment varies considerably, so some self-employed individuals need BOE insurance, but others don’t. Keep reading to learn when you should offer your clients BOE coverage.
What Is BOE Insurance?
To understand who can benefit from BOE insurance, you need to understand what it is.
Business overhead expense insurance, often called BOE insurance, provides benefits to cover certain business costs during periods of disability. While individual disability insurance is designed to help policyholders deal with personal costs, such as housing and groceries, BOE coverage is designed to cover business costs, such as lease payments and employee compensation. The benefit period typically lasts for up to 12 or 24 months.
BOE Insurance Can Save Small Businesses
When a disability strikes a small business owner, the business may not survive. In many small businesses, the owner plays an integral role in daily operations. Without the owner’s hard work, revenue may plummet, possibly to $0. Meanwhile, overhead expenses like employee wages, lease payments, utilities, and equipment costs can continue. Even if the disability is only temporary, the business owner may have no choice but to close the business permanently.
With BOE insurance, the business owner can afford to keep the business afloat. This gives the owner time to recover without worrying about the business, or if recovery isn’t likely, it gives the owner time to sell the business or find someone else to manage it.
For many small business owners, BOE insurance is a critical way to protect all the hard work they’ve put into building a business. However, not all self-employed individuals need this coverage. When deciding whether to offer BOE coverage, there are two critical questions to ask…
1. Does the Business Depend on the Owner’s Work?
Some business owners take a hands-on approach to running their business, but others let a manager handle the daily operation. If the business owner is responsible for a significant portion of revenue, BOE coverage may be a smart idea. On the other hand, if the business can operate fine without the owner, BOE insurance probably isn’t necessary – but key person disability insurance may be needed in case an indispensable employee becomes disabled.
2. Does the Client Have Significant Business Costs?
Some self-employed individuals run restaurants, shops, or offices with significant overhead expenses. Others are freelancers who work from home, with no employees and few overhead costs. The former can benefit from both individual disability insurance and BOE insurance, while the latter may only need individual disability insurance. After all, if you don’t have any business overhead expenses, you don’t need business overhead expense insurance!
Who Needs BOE Insurance?
If a self-employed client has significant business overhead costs, and if their revenue would drop significantly during a period of disability, that client is a prime candidate for BOE insurance.
Here are some examples of clients who probably need BOE insurance.
- Doctors, dentists and chiropractors with their own clinics. Many medical professionals own their own practices. If they can’t work due to disability, they can’t see patients and earn revenues, but they still have support staff and bills that need to be paid.
- Restaurant, bakery, and catering company owners. The food service industry requires hard work, and business owners often do a lot of it themselves, whether they’re preparing the food or managing the restaurant.
- Any business owner with a physical location. This could be someone who owns a salon, boutique or winery, or it could be an accountant, architect, graphic designer, or marketer with an office. During a period of disability, the lease, utilities and equipment costs can rack up.
- Any business owner with employees. If the owner can’t afford to pay employees during a period of disability, layoffs are the only option. BOE insurance can prevent that from happening.
- Any business owner with bank loans. Be careful – regular BOE insurance does NOT cover bank loans. However, it’s possible to secure bank loan disability insurance coverage.
Do You Need Help Selling BOE Insurance?
DIS has you covered.
- When approaching clients, use the What’s Included with Business Overhead Expense Insurance client handout.
- Also check out the BOE Quick Tip Sales Strategy with advice on how to close more sales.
