Which type of business insurance is designed to cover the ongoing costs of operating the business while the owner is disabled?

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

Answer: (B)

Think about what the business needs if the owner can’t work: the fixed costs keep coming—rent, utilities, payroll for non-owner staff, loan payments, and other overhead. A policy built to reimburse those ongoing overhead expenses is designed exactly for that situation. It pays the business a monthly amount to cover those costs while the owner is disabled, and the funds go to the business to keep operations running. It’s not about replacing the owner’s personal income; it’s about preserving the business’s ability to operate during the disability. Benefits usually begin after an elimination period and run for a set period, often up to a year or two.

This differs from the other options: a key person policy insures against financial loss from the absence of a crucial employee but isn’t specifically about overhead; a disability income policy would replace the owner’s personal earnings, not the business’s expenses; and a buy-sell agreement governs transfer of ownership on disability or death, not ongoing operating costs.

So the policy that best fits covering ongoing business costs during the owner's disability is the business overhead expense policy.