What Kind of Disability Coverage Do You Need?

Confused over the differences between Long Term Disability Insurance (LTD) and Business Overhead Expense Insurance (BOE)? While both plans provide a monthly benefit if you are disabled and unable to work, the purposes are very different: LTD provides a monthly benefit to cover your personal expenses while you are disabled, whereas BOE provides a monthly benefit to cover your ongoing business expenses while you are disabled.


Long term disability insurance

Long term disability insurance provides income for you and your family to cover most of your everyday personal living expenses of your household such as mortgage, grocery bills, utilities, auto expenses, etc. Usually calculated as a percentage of your monthly income (60–70%) or a specific monthly benefit roughly equal to the 60–70% of your monthly income, the benefit is often stated as a flat monthly amount like $6,000 per month—or the actual amount that you have been underwritten and approved for by your insurance carrier.  This coverage is important to protect the financial well-being of you and your family while you are disabled. And if you are paying the disability premium yourself, then the disability payment you collect may not be subject to federal tax.

Employee disability plans that a firm might offer as an employee benefit also cover personal disability – and can be an important benefit to retain valuable employees. Considering the cost of lost wages due to long term illness or injury, employees value disability coverage and firms can secure coverage for its employees covering up to 60% of income to $6,000 per month with guaranteed acceptance. Most disabilities are not long term but temporarily prevent one from working with potentially severe financial consequences. If an employer is paying the premium, then the monthly disability benefit may also be subject to federal income tax, further reducing the monthly payment.


Business overhead expense insurance

Business overhead expense insurance provides a monthly benefit designated for your firm to cover most of your business expenses associated with keeping your firm operating while you are not working such as employee salaries and benefits, rent, business loans, utilities, professional membership fees, insurance premiums and other monthly business bills. You should calculate the actual monthly cost to run your practice and then seek Business Overhead insurance to cover the monthly cost to maintain your practice in the event you are not able to work and generate billed revenue to cover your overhead costs. This coverage provides protection for your firm during a time when you cannot work due to disability. This plan is especially important for sole practitioners and single-professional firms. In addition, for those firms set up in a partnership, one’s portion of ongoing expenses continue whether or not one is working.

The simple truth is that long term disability insurance is designed to protect the financial well-being of you and your family while Business Overhead Expense coverage protects the financial well-being of your practice and those who work for you.

If you are a solo practitioner or a partner in a small firm, then you should consider enrolling in both plans, so in the event you ever become disabled, you have the protection you’ll need for both your family and your firm.

Both types of coverage are available through the AIA Trust with a top-rated A+ carrier, New York Life Insurance.

What if it’s not the right plan?

The AIA Trust Group Disability Insurance Plans offer a money-back guarantee if you change your mind about coverage in the first 30 days. Just return the Certificate of Insurance without claim and your premium will be promptly refunded.

For detailed information on the AIA Trust Group Disability Insurance Plans call (877) 801 3727 or learn more.

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