Overhead Expense Agreements

Overhead Expense policies are reimbursement policies.  They reimburse the disabled professional or business person for actual business expenses while disabled.  Overhead expense policies can be issued to pay substantial monthly benefits ($15,000 or more).  The benefit period ranges from 12-24 months.  Premiums for overhead expense policies are deductible as a business expense and although when the benefits are received are considered taxable income to the business; they are intended to be used to pay tax deductible business expenses.

The following is a list of business expenses covered by an individual overhead expense contract.

  • Rent/lease of property
  • Employee salaries (not related to the owner)
  • Utilities
  • Property taxes
  • Accounting services and collection fees
  • Business insurance premiums
  • Depreciation on business assets
  • Telephone and telephone answering services
  • Association dues
  • Interest on mortgage or business loans
  • Lease on business equipment
  • Laundry, maintenance and janitorial services
  • Postage and stationery

Depending on the insurance company, the following are the most common riders available for an overhead expense contract.

Future Insurability – allows one to purchase further benefits at stated times in the future regardless of health or occupation.  Future purchases depend on earned income.

Catch-up – pays a retroactive benefit based on the number of months in the waiting period, after total disability has lasted 180 consecutive days.