Ensuring your business can always meet its financial obligations is crucial, especially if you or a co-owner cannot work due to a disability. Business overhead expense insurance provides a safety net, helping your business cover its ongoing expenses when unexpected circumstances arise.
Understanding Business Overhead Expense Insurance
Business overhead expense insurance is essentially a disability insurance policy tailored for business owners. It helps cover eligible business expenses when the insured owner cannot work because of a disability. This type of policy ensures that your business can continue to operate smoothly, even if you or a co-owner are temporarily out of commission.
Why Business Overhead Expense Insurance is Essential
If you or a co-owner become disabled and are unable to generate income, business overhead expense insurance can help you:
- Retain Valuable Employees: Pay salaries to keep your essential staff members and maintain business operations.
- Cover Fixed Expenses: Manage ongoing costs such as rent, property taxes, utilities, and other necessary expenses to keep your business running.
Who Needs Business Overhead Expense Insurance?
This insurance is particularly important for business owners whose income is vital for covering fixed business expenses. It’s highly recommended for professionals such as physicians, lawyers, accountants, or owners of closely held businesses. Any business where the owner’s ability to generate income is critical to the business’s survival should consider this insurance.
Coverage Providers in Canada
In Canada, there are three primary providers of business overhead expense insurance:
- RBC Insurance: Offers Business Overhead Expense Insurance.
- Canada Life: Provides the Overhead Expense Plan.
- iA Financial Group: Offers this insurance as a rider on individual disability insurance products, aimed at self-employed individuals.
Coverage Duration and Terms
Business overhead expense insurance can typically be maintained until the insured owner reaches age 65. After 65, the policy is conditionally renewable if the owner continues to work full-time (at least 30 hours per week) and is responsible for maintaining the business’s expenses. Rates and benefit periods may change after age 65, and the policy can continue until age 75, though the total disability benefit will be reduced by 50% after age 75.
Exclusions to Be Aware Of
While business overhead expense insurance offers significant benefits, there are some exclusions. Benefits will not be paid for disabilities resulting from:
- Acts or accidents of war (declared or undeclared)
- Normal pregnancy or childbirth (disabling complications of either are covered, however)
Eligible Business Expenses
The policy covers various business expenses, ensuring your operations can continue without interruption. These eligible expenses include:
- Employee salaries
- Rent
- Utilities
- Internet
- Phone and fax lines
- Lease costs for equipment such as dental machinery
By securing business overhead expense insurance, you can ensure that your business remains financially stable and operational, even when unexpected challenges arise. This insurance not only helps protect your livelihood but also supports the continuity and success of your business in the face of adversity.
For more information on how business overhead expense insurance can benefit your specific business needs, contact Finuity Wealth for personalized advice and solutions.
