But, depending on the type of physician you are, there may be one more type of insurance you may need:
Business overhead expense insurance. BOE is a must for any physician that owns all or part of a practice.
Ready to learn what it’s all about?
Here’s our full guide to physician practice disability: BOE reimbursement.
What is Business Overhead Expense Insurance?
Business overhead expense insurance is precisely what it sounds like — insurance protection covering the cost of your overhead expenses. What makes it different from other types of business insurance is that you can only collect benefits if you are unable to pay business expenses due to an illness, injury, or disability.
As a separate policy or as a rider added to your disability insurance, most physicians who own businesses add this to their insurance portfolio.
Think of BOE as an extension of your disability insurance policy. It’s a safety net and an added layer of protection in case you ever lose all or part of your income due to a disability or injury. With BOE insurance, you can save or preserve your practice even when you can’t earn the income needed to pay for your business expenses.
And while BOE insurance will protect your business, that’s not the only thing it protects. Having it is also a way to protect your personal assets. Without it, you run the risk of draining your savings or selling off individual assets to keep your business afloat if you become ill or disabled.
BOE insurance is different from disability insurance in that it covers your business, not you. They are complementary policies, and you should have both if you own a business or are a partner in a medical practice.
What Does Business Overhead Expense Insurance Cover?
You’re able to use business overhead expense insurance to pay for just about every financial obligation your business incurs monthly.
It covers your rent, mortgage payments, utilities, general maintenance fees, and property taxes. You can use it to pay for payroll taxes, as well as your employee salaries and employee benefits.
BOE can also apply toward the cost of office supplies, medical equipment, loan payments on business loans, and insurance premiums for insurance carried by your business.
And there’s one other crucial thing you can use it for. Something that can entirely make or break your business if you become too ill or disabled to work: hiring a locum tenens physicians.
If you suffer a medical disability and cannot work in your own practice, you’ll need to find someone to provide care to your patients. Otherwise, you’ll risk losing those patients to another doctor.
What BOE Does NOT Cover
Before you add BOE to your disability insurance policy, it’s also essential to understand what BOE does not cover.
BOE only covers your operating expenses. It does not include any of your personal expenses. You cannot use it to cover your own salary, wages, or lost profits — you’ll need personal disability insurance for that.
It cannot cover the salaries of anyone who pays a share of your overhead expenses, such as other partners in your practice.
And while you can use it to replace necessary medical equipment or essential furniture, you cannot use it to make any additions or renovations to your office or practice after the date of your disability.
How Does BOE Work?
So how exactly does BOE reimbursement work?
It all starts with meeting the definition of disability as detailed in your insurance policy.
Every disability insurance policy includes a definition of disability. To file a claim and collect benefits, you need to meet the standards established in that definition.
At Physicians Thrive, we always recommend that physicians opt for the “true own-occupation” definition. Under this definition, you will be eligible to collect disability income insurance benefits if you are unable to do some, part, or all of your current job in your specialty.
This is the most flexible definition and the easiest to meet, making it the only one that physicians should accept.
You can add BOE insurance as a rider to a disability insurance policy or as a separate policy with optional riders of its own. Either way, the process for filing a claim and collecting benefits follows the same protocol.
Just like filing a disability insurance claim, the first step in the process of BOE reimbursement is meeting the definition.
Related Reading: Why Doctors Need Own-Occupation Disability Insurance.
The Reimbursement Process, Step by Step
If you believe you meet the definition of disability as described in your policy, file a claim. And prepare to prove that your disability is causing you to lose income required to pay your business expenses.
Once your claim gets approved, you will need to wait out the elimination period that you chose when you initiated your policy. Disability insurance elimination periods can range from 30 to 720 days, but most BOE elimination periods range from 30 to 90 days.
The shorter the waiting period you choose, the more you will pay in monthly premiums. Choose the 30-day elimination period if you can’t sustain your business expenses and run your practice without income for more than a month.
You will start receiving monthly benefits as soon as your elimination period ends. Then continuing for the duration of the benefit period, you chose in your policy. Most insurance companies offer BOE benefit periods between 12 and 24 months.
Finding a Business Overhead Expense Insurance Provider
There are dozens of insurance providers who offer disability insurance products for physicians. But some insurance companies offer much better value, benefits, and options for high-income earners.
Most companies offer some version of business overhead expense insurance as either a separate policy or as a rider to your disability insurance policy.
It’s up to you if you prefer to take out a specific BOE policy or add this extra protection as a policy rider. Guardian, Principal, and Ameritas are just three of the top insurance providers who offer this added protection.
Guardian offers an Overhead Expense Policy with benefit periods of 12, 18, and 24 months and elimination periods of 30, 60, and 90 days.
Non-cancellable and guaranteed renewable to age 65, this policy provides:
“…financial protection when the absence of a business owner would result in significant loss of revenue.”
This policy is issuable to physicians between the ages of 18 and 60.
Principal offers their Overhead Insurance policy for fee-for-service businesses with up to eight owners. This policy provides elimination periods of 30, 60, or 90 days. It includes a carry-forward feature (a rollover allowance) that allows you to spend unused benefits from one month in the next month.
Ameritas offers BOE insurance as a series of individual riders that you can add to your disability insurance policy.
With Ameritas, you can add the Substitute Salary Expense Rider to pay the salary of a locum tenens physician. You can add the Business Loan Repayments Rider specifically to make principal and interest payments on business-related loans.
Ameritas also allows you to add an FIO rider to your BOE policy so that you have the option to increase monthly benefits if need be.
It is also possible to have a BOE rider and a separate policy for even more protection. If you have both, use the maximum benefits from your BOE rider first. Then use your separate policy to make up the difference if you have any added business expenses.
Physicians Thrive is committed to helping physicians find the best insurance policies for their businesses. Check out our disability insurance provider reviews to learn more about individual insurance companies and what benefits they have to offer.
How Much BOE Coverage Do You Need?
Business overhead insurance is an extra measure of protection that every physician/business owner should have.
But how much coverage do you need?
Ideally, you should seek coverage for 100% of the business expenses that you are responsible for.
Total up your rent, utilities, staff salaries and benefits, business insurance premiums, payroll taxes, and other monthly business expenses. If you share your practice with one or more partners, calculate what your percentage of the business expenses are. That dollar amount is how much insurance coverage you’ll need.
Here’s why you should seek 100% coverage:
The whole point of BOE is not to have to worry about paying your business expenses while you’re injured, ill, or recovering from a disability.
Your personal disability insurance will only provide you with a fraction of your salary. Without 100% BOE coverage, you’ll need to find other means to pay your bills (such as dipping into your savings).
Most BOE insurance policies have a maximum monthly benefit. This figure is usually between $15k and $25k per month.
If your business expenses total $20k and your policy offers a maximum of $25k, keep your coverage at the $20k you need. You won’t be able to spend the extra $5k on anything that isn’t directly related to your business. So there’s no point in paying for that additional coverage.
Some plans have rollover features that allow you to carry a portion of your unused benefits over to the next month. For example, if you have $20k in coverage per month and only spend $19k in June, a rollover policy will allow you to spend $21k in July.
It is not uncommon for business expenses to vary slightly from month to month (based on utility bills, the need for office supplies, or the number of hours worked by your employees). For this reason, the rollover feature can be quite beneficial.
Further Reading: Hidden “Own-Occupation” Traps in Physician Disability Insurance.
Who Should Have BOE?
Any physician who owns or is a partner in a practice should have business overhead expense insurance. In the event that you become too ill to work, you cannot expect your partners to be on the hook for your share of the expenses.
Some physicians that have business loans or medical practice loans may be required to carry BOE insurance. Some lenders insist that you take out a BOE policy before they’ll grant you a loan. And that’s because a BOE policy guarantees that the lender will continue to receive their monthly payments.
There’s another good reason to have BOE: to retain your best employees.
Are you the only physician in your own private practice?
If so, you may decide to temporarily close your business rather than hire a locum tenens physician to see your patients while you’re ill. If you close your practice, even for a short period of time, you can be sure that your staff will seek employment elsewhere.
With BOE insurance, however, you can cover those employees’ salaries even while you’re temporarily closed. This will keep your staff in place so that they’re ready to work for you again when it’s time to reopen.
BOE insurance is essential if you own a business or medical practice. Without it, an illness or a short-term disability could force you to have to drain your savings trying to keep your business afloat. Or even worse — close your business.
If you don’t already have physician disability insurance, now is the time to choose a policy and add BOE for extra protection. If you already have disability insurance, talk to your insurance provider about adding the BOE rider or underwriting a separate policy.
For more guidance and assistance on finding the best insurance company for BOE insurance, contact Physicians Thrive now.
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