During the COVID-19 pandemic, orthodontists and veterinarians have had to battle severe illness, leaving them unable to work and their practice without any way to bring in revenue. Disability overhead expense insurance for businesses provides an essential layer of protection for your business in the event that you become disabled due to injury or illness. It is different from traditional disability insurance in that it covers the business. Disability insurance covers you, but disability overhead expense insurance can help your business continue operating if you get sick and can’t work. This type of insurance is especially helpful for those in the orthodontic and veterinary business and has continued to provide valuable protection throughout the COVID-19 pandemic.
It can also be easy to confuse business insurance with overhead disability income insurance because both of these provide coverage to the business in the event that something happens, but while business personal property insurance protects the business from outside forces such as natural disasters, disability overhead insurance protects the business if you’re not able to maintain operations due to a disability.
What is Business Overhead Expense Insurance?
As an orthodontist or veterinarian running your own practice, you’re likely the one responsible for bringing revenue into your business. This means that the entire operation of the business depends on you. But, what happens when you’re not able to work due to an illness or injury? If you become disabled, your business could suffer and might not be able to continue supporting its operations. Disability overhead expense insurance provides protection in that it will pay out to allow the business to continue operating if you become disabled. It typically covers day-to-day expenses. Policies have varying lengths of time, but the most common ones provide coverage for between 12 and 24 months.
Disability Income Insurance Policy
Most veterinarians and orthodontists who are responsible for their practice can qualify for disability income insurance. Each policy is different, but there may be limits for those who are 65 years and older and running a practice. Coverage is usually available for practices that have 10 or fewer professionals.
As practices grow, fixed expenses also grow. When you first purchase your disability overhead insurance, you will choose a coverage that matches your business at the time that you’re purchasing. But, as your practice grows, you may need to increase the coverage that you have so that your business won’t be underinsured in the event that you become disabled. Regularly review your policy to make sure that you are adequately covered and be sure to purchase additional coverage as your practice grows. You may also be able to purchase a rider on your policy that will automatically adjust your coverage to meet the rising costs of running your practice.
The Importance of Both Disability Overhead Income Insurance and Disability Insurance
In the most basic terms, the difference between disability overhead expense income insurance and disability insurance is that the former covers your business while the latter covers you. Your overhead expense coverage is made to allow your business to operate, but disability coverage is meant to help you operate. Your disability insurance will replace your salary if you become disabled.
It’s crucial to have both policies because they do not usually overlap coverages. If you only have a traditional disability policy, you will still get a salary (or a portion of your salary) if you become disabled. But, your business may not be able to operate without you. On the other hand, if you only have business overhead expense insurance, your salary will not be covered. Your business can continue operating, but you might not be able to pay your personal expenses. Having both policies may sound redundant because they have similar names, but they are both very different coverages and both play an important role if you become disabled.
What Constitutes a “Disability”?
For the purpose of business overhead expenses, a disability is anything that could render you unable to work or perform your daily duties. As an orthodontist or veterinarian, this could be anything from working with your patients to running your office. Those who own their own practices wear many hats and find themselves doing many duties above and beyond their professional ones. A disability could leave you unable to perform any number of things and interrupt your ability to work.
Accidents and Injuries
A common reason for a business owner becoming disabled is an accident or injury. This could be an on-the-job accident, but it doesn’t always have to be. As an orthodontist or veterinarian, you put yourself at risk every day and accidents happen in any environment. When you factor in variables like patients, medical equipment, and stress that comes with the job, your risk for an accident that leads to injury increases.
Severe or Chronic Illness
COVID-19 has made severe illness front of mind for many business owners around the world. Living through a pandemic has made business owners warier about how they run their practice and has even changed the way that they get coverage. Many orthodontists and veterinarians have major operations interruptions throughout the pandemic because of illness. With disability overhead expense insurance, practice owners have been able to protect themselves during the times that they have had to be off of work for COVID-19. Other chronic and severe illnesses are also included in many policies.
Keep in mind that not all insurance companies are the same when it comes to what they consider a disability. This is why it’s important to find the right coverage and always understand your policy so you can have an idea of what is (and isn’t) considered a disability.
How Business Overhead Expense Insurance Helps
The amount of coverage that you purchase will determine the amount that the policy pays out. It’s important to have a clear idea of your fixed operating expenses and make sure that your policy is going to cover that amount. Before purchasing a policy, take the time to determine what your expenses are and if they are likely to change in the near future. Purchase coverage that’s adequate. Most policies will cover the full amount of your fixed expenses. Investopedia has great information about what operating expenses are and how to determine your OPEX.
If you are the sole practitioner of a large practice, disability overhead expense insurance becomes even more important. Your employees are counting on the income that they receive from your business and, if you become disabled and are unable to make money through the practice, your employees will also be negatively impacted. If you can’t pay rent or you can’t afford the utility bills while you’re not bringing in income, you may even lose the practice.
The larger your practice, the bigger the chance of it being negatively impacted by you — the owner — becoming disabled. All of these are major catastrophes that could have been prevented with a disability overhead expense insurance policy. Keep in mind that these policies are excellent for single-professional practices. Offices that have more than 10 veterinarians or orthodontists may need to find different solutions.
What is (and isn’t) Covered by Disability Expense Insurance
Your coverages will depend on your specific policy, but in general, disability expense insurance will cover fixed expenses. It will not cover anything above or beyond those expenses. Expect your policy to cover:
- Fixed operating expenses
- Employee salary
- Utility bills
- Day-to-day costs
- Any overhead that your business has
Disability expense insurance is made to help your business continue operating if you are disabled. It is not meant to cover you and is not meant to help provide improvements to your business. Most policies will not cover:
- New inventory or equipment
- Property upgrades
- Your salary (that’s what your disability policy is for)
Your Premiums and Taxes
While it may seem like just another expense to add to your growing list as a business owner, there are many benefits that come with adding this protection to your business. In addition to providing actual coverage for your practice if you become disabled, your premiums for disability overhead expense insurance are also tax-deductible, according to the IRS. It is important to work with your tax professional on deductions and use your specific policy to learn more about how taxes work with payouts on the policy.
At Loyall Group, we offer a variety of business insurance products. We can help you with everything from traditional disability insurance to disability overhead expense insurance, and other coverages your practice might need. Contact us today to find the policy that’s right for you.