The Value Of Overhead Business Expense
A company’s bottom line is income. It needs to earn enough to make the business profitable and it needs to be able to pay for the multitude of operational expenses it incurs on a monthly basis. With its owner and key employees on hand, the company takes on daily operations like a well-oiled machine. But there are many things that can disrupt operations and profit. The loss of an owner or key person can be a devastating event for a company.
Today, business owners can protect their operations with overhead expense coverage. This is a type of insurance that reimburses the insured businesses for their overhead expenses when faced with the loss of a key employee, such as an owner or co-owner, due to illness or disability. Overhead expense coverage is a guarantee that the company can breath a sigh of relief knowing that its overhead expenses will be taken care of during tough times.
What Does Business Overhead Expense Cover?
Business Overhead Expense (OE) coverage lists the following as expenses eligible for reimbursement: rent, water, electricity, gas, property insurance premium, business liability insurance premiums, telecommunications, laundry, janitorial services, depreciation costs, employees’ salaries, benefit payments, legal services, leasing costs used in operations, and other customary expenses.
The premium a company pays for OE coverage is tax deductible. According to the Interpretation Bulletin IT-223 regarding the tax status of OE insurance, the OE coverage plan should reimburse the actual amount of overhead expenses instead of being a fixed benefit amount.
What Is Not Covered?
Even if employees’ salaries are part of the coverage, OE insurance does not cover the salaries of business owners and blood relatives brought in to replace the lost key person. Also not covered are the salaries of employees with technical or specialized skills who can continue to bring revenue to the business.
And it is important to note that the cost of merchandise or inventory, the cost of equipment, travel, and personal taxes cannot be reimbursed by OE coverage.
When Can A Company Claim OE Insurance?
Once a business owner gets ill, disabled, and unable to work, the company can begin the claim on the insurance policy. All overhead expenses incurred during the period that the person is disabled may be reimbursed.
The Price Of Peace Of Mind
Business Overhead Expense insurance brings peace of mind to the company. With the policy on hand, the business is certain it will go on without sacrificing its credit standing with utility companies, lessors, banks, and other creditors.