A business overhead expense (BOE) disability policy pays:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A business overhead expense policy reimburses the business for fixed operating expenses, including rent, utilities, employee salaries, mortgage interest, and similar costs, that continue while an owner or key professional is totally disabled. The policy's benefit period is typically limited, and the benefits are paid to the business rather than to the individual. It keeps the doors open while the disabled owner recovers, which is why it is sold alongside individual disability income protection rather than as a substitute for personal income coverage.
Why the other options are wrong
- B) Personal living expenses are covered by the owner's individual disability income policy, not by BOE coverage.
- C) BOE policies pay the business's overhead, not the full salary of a replacement; replacement salaries are one eligible overhead item within stated limits.
- D) Personal income replacement for the owner is the function of an individual DI policy; BOE benefits are paid to the business for overhead only.
Memory hook
BOE pays the business bills while the owner heals: rent, utilities, salaries. Personal income is a separate policy.