A sole proprietor wants coverage that pays the business's fixed operating expenses — rent, salaries, utilities — if the owner becomes disabled. The appropriate product is:

Why A is correct

A business overhead expense (BOE) policy is disability insurance that reimburses a business for fixed overhead costs — rent, employee salaries, utilities, and similar continuing expenses — during a period when the owner is disabled and cannot run the business. It keeps the doors open while the owner recovers, for a limited benefit period. Key person life insurance pays the business a death benefit when a key person dies; split-dollar is a premium-sharing arrangement for cash-value life insurance; an annuity provides retirement income rather than disability-period overhead protection.

Why the other options are wrong

• B) Key person life insurance pays the company a death benefit when a key employee dies, compensating the business for lost contributions. It does not cover the owner's disability or pay ongoing operating expenses.
• C) Split-dollar is an arrangement in which the employer and employee share premiums, cash value, and death benefit of a permanent life policy. It is not designed to pay business overhead during a disability.
• D) An annuity provides a lifetime stream of retirement income funded by a lump sum or periodic payments. It does not reimburse business fixed expenses during the owner's period of disability.

Memory hook

BOE keeps the office lights on while the owner is down and disabled.