When it comes to prudent business planning, protecting the business from the effects of a disability comes in two forms Key Personal Disability Insurance and Business Overhead Expense insurance.
Key Person Disability Insurance
Businesses are only as strong as the people who run it. When an owner, partner, or key producer becomes disabled, the business itself is exposed. Fixed costs / overhead still has to be paid, and the loss of a key person's contribution can threaten revenue, credit, and continuity almost overnight.
Key person disability insurance is designed to address these exposures directly. Key Person Disability Insurance provides the business with a lump-sum or monthly benefit if that individual becomes disabled, giving the company the financial flexibility to recruit and train a replacement, cover lost revenue during the transition, satisfy lenders or investors, or simply absorb the shock while the business stabilizes. It is a business asset protection strategy first, and it is frequently required or strongly recommended as part of buy-sell agreements, partnership agreements, and lending relationships.
Not every person in the business is a key person but every business has people whose absence would be felt immediately. This is not just an owner, but often a top producer, a specialized technician, a rainmaking partner, or a founder whose relationships and expertise are difficult or impossible to replace on short notice.
Business Overhead Expense (BOE) Insurance
If a business owner becomes disabled, the bills don't stop. Rent, utilities, payroll for non-owner employees, loan payments, leased equipment, accounting and billing services, and insurance premiums all continue whether or not the owner is able to work.
BOE insurance reimburses the business for these covered overhead expenses during a period of disability, typically for 12 to 24 months, giving the practice or business time to either recover the owner's productivity or make an orderly transition. It is one of the most commonly overlooked, and most essential, coverages for small business owners, medical and dental practices, law firms, and other owner-dependent operations.
BOE is generally designed to cover:
- Rent or mortgage payments on business property
- Utilities and general office expenses
- Employee salaries and benefits (excluding the disabled owner)
- Equipment leasing costs
- Business loan interest payments
- Accounting, billing, and collection service fees
- Business insurance premiums
Typically for a short period of time such as 1 or 2 years while the business owner recovers or the business is sold. The incoming payments make sure that the business pays its bills and retains as much of its pre-disability value as possible.
Why These Coverages Require a Specialized Market
Business Overhead Expense and Key Person Disability Insurance are not retail products. Because they involve high benefit amounts, business-specific underwriting, and exposures that vary significantly from one industry to the next, only a limited number of insurance companies are willing and able to write this business at all.
This is where our access to Lloyd's of London becomes especially valuable. Through longstanding relationships with multiple Lloyd's coverholders, we're able to bring specialized underwriting capacity and flexible policy design to cases that many domestic carriers simply won't consider — whether because of the size of the benefit, the nature of the business, the health profile of the insured, or the structure of the coverage itself.
Working across several coverholders also gives us the ability to shop a case, compare terms, and structure coverage around the actual risk rather than fitting a business into a one-size-fits-all product. For business owners and their advisors, that means access to solutions that simply aren't available through conventional retail insurance channels.
Who Should Consider Business Protection Disability Insurance
- Physicians, dentists, and other professionals in owner-operated practices
- Law firms and professional services partnerships
- Closely held and family-owned businesses
- Businesses with a key producer, technician, or founder the business depends on
- Companies with buy-sell agreements with terms that trigger payouts on disability. How are you otherwise planning to pay for the payout?
- Businesses with bank loans or lines of credit tied to a key individual's continued involvement
How We Help
Because these are specialty placements, the process typically starts with understanding the business itself — its structure, its overhead, who the key people are, and what's already in place. From there, we work directly with the domestic insurance companies and our Lloyd's coverholders to structure a submission, negotiate terms, and place coverage that reflects the real financial exposure the business faces.
If your business, your practice, or your clients could be exposed by the disability of an owner or a key person, we'd welcome the opportunity to review the situation and discuss what protection is available.
Contact us to discuss Business Overhead Expense and Key Person Disability Insurance for your business.
Frequently Asked Questions
BOE reimburses the business for ongoing overhead expenses — rent, payroll, loan payments, and similar fixed costs — while the owner is disabled. Key Person coverage pays the business a benefit tied to the disability of an individual whose contribution is critical to revenue, giving the company flexibility to cover lost income or fund a transition. Many businesses carry both.