BOE coverage is designed to reimburse the owners of small businesses (sole proprietors, partners, and closely held corporations) for expenses resulting from an accident or sickness. The business must not be operated from the home. Moreover, the principal must devote full-time service to the business or practice to qualify and must be personally liable for the covered expenses. If the business is a corporation, benefits must be assigned. If the business is shared, only the insured's pro-rata share of the expenses will be covered.
The owner applies for insurance to pay covered monthly overhead expenses. Premiums are deductible regardless of the type of business entity involved. Benefits received are taxable, but since the business expenses they cover are deductible, it is a wash. The owner (or the company, if assigned) receives benefits while the insured is disabled. The result? Overhead expenses continue to be met and the business can stay open.
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