| Personal disability insurance protects a physician's | | | | disability policy does. Instead, BOE insurance allows |
| ability to earn income, but what protects his or her | | | | you to keep your practice open, or at least pay for |
| medical practice? Business overhead expenses are | | | | its expenses until you recover. In the case of a |
| just as relentless for those who suffer a disability. A | | | | long-term disability, it offers you up to two years to |
| practice that relies on a small number of people (or | | | | make a business decision, such as whether to shut |
| one person) to produce revenue is economically | | | | down or liquidate your practice, without worrying |
| vulnerable if one of those individuals becomes | | | | about accruing debt from business expenses. |
| disabled. A business overhead expense ("BOE") | | | | Maximum Benefits - Personal disability insurance pays |
| disability policy will cover the ongoing operating | | | | a monthly benefit as defined in the policy. BOE |
| expenses of your practice. It ensures that you do | | | | insurance policies offer a maximum monthly benefit, |
| not have to use personal assets to pay for business | | | | but only pay the actual overhead expenses if they |
| expenses if you become disabled. | | | | are less than the maximum benefit. For example, if |
| If the insured does become disabled, a BOE policy | | | | the maximum monthly benefit is $1,000 but actual |
| pays a monthly benefit based on business expenses, | | | | business overhead expenses are only $600, the |
| not anticipated profits. The following are some | | | | benefit paid is $600. With some insurers, that unused |
| business overhead expenses that are covered by | | | | $400 benefit can be applied to increase future |
| BOE insurance: | | | | monthly maximums or to extend the benefit period. |
| - Rent or Mortgage Payments | | | | Taxation - As long as premiums for personal disability |
| - Employee Salaries and Benefits | | | | insurance are paid with after-tax dollars, the benefits |
| - Utility Bills | | | | are tax free. DOE insurance benefits are subject to |
| - Property Taxes | | | | income tax, but the premiums are tax deductible as a |
| - Accounting Fees, Legal Fees, and Professional Dues | | | | business expense. |
| - Malpractice and Other Business Insurance Premiums | | | | One similarity that BOE insurance and personal |
| - Maintenance and Janitorial Services | | | | disability insurance policies share is that the sooner |
| - Depreciation | | | | you purchase a policy, the better. Not only will you |
| - Interest on Business Debts | | | | get lower rates when you are younger and generally |
| - Office Supplies | | | | in better health, but additional coverage can be |
| - Other Fixed Expenses that are Ordinary, Necessary, | | | | purchased later without providing further evidence of |
| and Tax Deductible | | | | medical insurability. |
| Some policies even cover the salary of a temporary | | | | BOE insurance is a great idea for small practices with |
| employee hired to do the duties of the disabled. | | | | several physicians. If one physician is disabled, their |
| Income taxes, the cost of inventory, and the cost of | | | | portion of business overhead expenses will be |
| furniture are a few expenses that are not covered. | | | | covered by the policy so the other physicians are still |
| There are several key areas in which BOE insurance | | | | able to practice without an extra financial burden. |
| differs from personal disability insurance. | | | | Your practice should allow you to earn income, not |
| Benefit Periods - Usually, BOE insurance policies have | | | | be a financial parasite if you become disabled. BOE |
| short benefit periods that do not exceed two years. | | | | insurance doesn't just protect your practice... it |
| Remember that BOE insurance is not protecting your | | | | protects you. |
| ability to generate income-that is what a personal | | | | |