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BOE policy from Ameritas brings new benefits to the market for physician practices.

Business overhead expense (BOE) insurance is a type of disability insurance that's designed to protect your practice if you become disabled. Specifically, it provides monthly payments to your business for a specified period of time so that your practice can meet its routine expenses and remain open while you're disabled. Though you're the insured under the policy, the practice is the owner and the beneficiary.

Why Consider a BOE Policy?

The ability to keep your practice open while you're disabled can be reassuring to your patients, creditors, and employees. Without a BOE policy, you may find it difficult to keep the doors open, staff from moving on, and perhaps even trying to use personal funds or taking on debt to meet business expenses. You might even be forced to close the practice. With this coverage, you'll be able to keep your practice afloat, at least for a period of time. And if you decide to sell your practice after becoming disabled, the benefits paid under such a policy can keep your business practice operating, preserve the value of the practice and give you some breathing room to And a suitable buyer. Keep in mind that business overhead expense insurance doesn't replace the personal disability insurance you need to have--it supplements your personal coverage. While a personal disability policy replaces a portion of your own income if you become disabled, business overhead expense insurance covers the routine expenses that your practice may incur during your disability. Your personal disability policy pays benefits to you; your business receives the benefits under the business overhead expense insurance policy.

What's covered?

Business expenses eligible for reimbursement usually include:

* Lease, rent, or mortgage payments

* Loan and mortgage interest (See below in the "What to Look For" paragraph regarding the Ameritas Business Loan Repayment Rider)

* Utilities and telephone, laundry, janitorial, and maintenance services

* Accounting and legal services (Built in feature of the Ameritas BOE policy)

* Professional trade dues and subscriptions

* Employee salaries and benefits

* Salary for a professional replacement for your position (See below in the "What to Look For" paragraph regarding the Ameritas Substitute Salary Expense Rider)

* Equipment depreciation and/ or equipment lease payments

* Insurance premiums

* Taxes

* Other fixed expenses normally incurred in running the business

However, certain expenses may not eligible for reimbursement, under most policies, or may require purchase of a rider:

* Your salary

* Salaries of family members hired after the onset of your disability

* Salaries of any other co-owners who are members of your profession or occupation (e.g., your partner in a medical practice)

There are two important time periods to keep in mind: the elimination period and the coverage period. The elimination period is a waiting period between the start of your disability and the start of benefit payment. The elimination period is commonly 30, 60, or 90 days. The coverage period is the maximum length of time that benefit payments will be made, usually 12, 18, or 24 months. Benefit payments begin after the elimination period and continue for the length of your disability or the coverage period, whichever is less. You choose both the elimination period and the coverage period when you buy the policy. The longer elimination periods and/or lesser payout periods have a lower premium.

Benefits can vary and are subject to a monthly maximum.

During the coverage period, the policy will reimburse your practice each month for its overhead expenses up to a certain amount, known as the monthly benefit. When you buy the policy, you select the monthly benefit based on your business's normal monthly expenses. Most insurance companies will provide you a monthly expense form to calculate your covered expenses. Keep in mind that expenses can vary from month to month, so the actual amount paid each month can also vary. Some policies allow your practice to carry from one month to the next the difference between its actual expenses and the monthly benefit. If the monthly expenses are lower than the monthly benefit, your business will accumulate extra funds to offset months when it's monthly expenses exceed the monthly benefit. This feature, called the Accumulation Benefit, is a built in benefit of the Ameritas BOE policy. Additionally, some policies will pay benefits past the end of the coverage period until the balance you're carrying forward is depleted. This is a feature known as the Extension of Benefits and is also a built in feature of the Ameritas BOE policy.

What to look for

Several policies now have a rider which allows you to cover various types of business loans that you have for the practice or business. New in the Ameritas policy, the insured can add as many as three different business loans with a cumulative loan value of no more than $1,000,000 with payments totaling no more than $10,000/ month. The key component of this rider is even if the insured has exhausted the base benefits of their BOE policy, AMERITAS WILL CONTINUE TO MAKE THEIR MONTHLY LOAN PAYMENT(S) FOR THE REMAINDER OF THE TERM OF THE LOAN(S). Additionally, be looking for a policy which provides value added benefits, such as reimbursement for various types of costs often associated with a disability ... such as benefits to help you And a replacement (known as a Finder Fee Benefit--another built in feature of the Ameritas BOE policy that pays up to maximum benefit of $5000) or monies to help prepare the practice or business for sale if you will not be able to return. This built in benefit in the Ameritas policy was mentioned above in the section titled "What's Covered". This benefit is known as the Legal and Accounting Fee Benefit with a maximum benefit of $5000. The Substitute Salary Expense Rider provides an additional benefit amount, over and above the base monthly benefit, that will reimburse the "salary" paid to employ a "substitute" professional to carry out the duties you, as the insured, would have performed if you were not disabled. These valuable benefits are designed to help you when you are most vulnerable.

Tax issues

Even though you're the insured party under the policy, the business owns the policy and pays the premium. The premium payments that the business makes are deductible as a business expense. As a result, any benefits that the company receives under the policy are treated as taxable income. This taxable income is offset when the business uses the benefit payments to pay deductible business (operating) expenses.

Final thoughts

The West Virginia State Medical Association has partnered with Ameritas to provide the members of the association with a 15% discount on Business Overhead Expense policies as well as individual income protection policies. Premiums will be based on your age, health, type of business, and the amount of coverage you wish to purchase. To buy this coverage, you'll need to go through both medical and financial underwriting, as you do when applying for an individual income protection policy.

For additional information on this valuable policy, please contact Steve Brown (WVMIA) at 304-9250342 x22 or or Joe Noca (Ameritas) at 724-8343206 or

by: Joe Noca

Ameritas DI Center Manager--Pittsburgh Regional DI Center
COPYRIGHT 2015 West Virginia State Medical Association
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Title Annotation:WV Medical Insurance Agency: NEWS; business overhead expense; Ameritas Life Insurance Corp.
Author:Noca, Joe
Publication:West Virginia Medical Journal
Geographic Code:1USA
Date:Jan 1, 2015
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