Which policy covers the ongoing overhead costs of a business when the owner is disabled?

• A. Business overhead expense policy
• B. Disability income policy
• C. Buy-sell policy
• D. Key person policy

Answer: (A)

When a business owner becomes disabled, the priority is keeping the operation running without collapsing the fixed, ongoing costs. A business overhead expense policy is designed for this need. It provides a monthly benefit to cover ordinary, necessary overhead such as rent, utilities, salaries of non-owner staff, and debt service, so the business can continue operating even while the owner is out. It’s meant to preserve the business’s routine expenses rather than replace the owner’s personal income or fund ownership transfers.

This type of policy typically starts paying after a waiting period (elimination period) and may run for a defined benefit period, often up to a year. It does not cover the owner’s salary or profits, and it won’t fund capital expenses. In contrast, a personal disability income policy would replace the owner’s own income, not the business overhead; a buy-sell policy handles transfer of ownership, and a key person policy compensates the business for the loss of a key individual rather than specifically covering ongoing overhead.