You have likely heard of disability insurance, which provides a monthly benefit to those who are disabled and cannot work. However, you might not be aware of a specific kind of disability insurance tailored to business owners—business overhead insurance (also known as overhead expense insurance or BOE insurance).
Business overhead insurance does not cover your lost wages if you become disabled. Instead, it covers your business’s fixed expenses if you become disabled. As a dental practitioner, you are the largest source of your practice’s income. If you cannot practice for any period of time, it can take a serious toll on the revenue for your overall practice.
As a dental professional, even just a few months away from your practice can result in significant financial harm. BOE insurance will “kick in” if you cannot perform the material responsibilities of your job and you are under the care of a doctor to address your disability.
Every policy has a slightly different definition of disability, but, in general, you will have to meet the following requirements to qualify to receive benefits.
Your insurer might have a cap on how many owners there can be for a policy to apply. Several other restrictions might apply as well.
Most policies will cover expenses for a specific period of time, such as 12, 18, or 24 months. These terms apply as long as you continue to meet the general definition of being disabled. Benefits will end when you recover enough to return to work (which is usually determined by your doctor).
An elimination period is the amount of time you have to be considered disabled before benefits start. Policies vary on the required time that you have to be disabled, but the shortest time is usually 30 days. Some policies have elimination periods of up to 90 days.
Business overhead insurance will generally cover fixed business costs. The expenses should be “usual and customary” for the dental industry. These expenses are generally those that are deductible for federal income tax purposes. Below are just a few examples of costs that would likely be covered under a business overhead insurance policy.
Business overhead insurance will cover regular rent or mortgage payments to keep up with the physical location where you practice. Keep in mind that this is insurance for your business—it will not cover your personal expenses, but it will address business needs to keep the doors open.
Most policies will cover things like hourly wages or salaries for your employees. Regular employee benefits (at least the employer portion of those benefits that the practice would normally cover) should also be covered. However, a BOE policy will not cover your personal missing wages or salary.
Some policies can cover the cost to substitute your services for someone else. For example, if you bring in another dentist to cover patients on contract for a short time, your policy might cover all or part of those expenses. Some policies will require an additional rider to address those fees, so read your policy carefully to see if you have this type of benefit.
As long as the expense is “usual and customary,” it should be covered. Sometimes, this includes office supplies or patient care supplies that should be addressed in your benefits. Any expense that is required to keep your practice up and running (but is not over and above what is necessary) should be covered.
Property Taxes
Tax obligations, including property taxes, should also be covered. These amounts are required a couple of times per year, and if the expense falls within a period that you are disabled, you should receive a benefit to address this expense.
Professional fees that are not out of the ordinary should also be covered. You should not plan any huge legal or accounting projects while you are disabled, however. Things like switching accounting systems or re-doing your corporate documents might not be covered because those are expenses that would be over and above your normal costs.
BOE insurance will also likely cover your professional dues and fees, including trade dues. While these fees are directly attributed to you, they are required to keep your practice going, so they are considered a necessary expense for a dental practice.
Benefits can also be used to pay loan installments on existing debts. However, if you go into further debt while disabled, benefits likely will not apply to those new debts. That means that paying on existing equipment loans will likely be covered, but payments for new equipment that you acquire while you are disabled likely are not covered.
Some policies also provide additional coverage for debt services, which includes costs associated with debt collection services, billing, and accounting.
A few items are specifically not covered by business overhead insurance. A few exceptions are mentioned above, but you should generally keep in mind that the expenses BOE insurance covers are supposed to be “usual and customary.” Upgrades or suddenly increased costs are likely not going to be covered.
A few examples of items that will likely not be covered include:
If the expense will be covered from another source, you also likely cannot get benefits for it. The most common example is an expense that is passed on to customers, such as administrative costs for certain services.
If you become disabled as a dental professional, that sudden loss of income necessary to run your practice can be devastating. Having business overhead insurance might be the best way to decrease this risk and address your practice’s most significant costs.
Dental & Medical Counsel can provide assistance to professionals who need advice and information on running their practices effectively—from insurance to corporate documents. When you are ready to learn more, the dental attorney team at Dental and Medical Counsel is available to help. Contact us to set up a complimentary consultation with attorney Ali Oromchian.
Dental & Medical Counsel is committed to helping doctors avoid legal pitfalls. We take care of the legal stuff so you can take care of your patients. Our passion is to help you traverse the legal landscape and it is a job we take very seriously. We provide a wide range of services, including practice transitions, partnerships, employment agreements, employment law, lease reviews, real estate purchases, estate planning, trademarks, incorporations, and more. We can’t wait to work with you!