Have you heard of Business Overhead Insurance but aren’t sure what it is or how it works? We’ll walk you through everything you need to know about this type of insurance, its benefits, eligibility, what it does and doesn’t cover, and more, so you can make a well-informed decision about your pharmacy.
What is Business Overhead Insurance?
Business Overhead Insurance is an essential form of coverage that pharmacy owners should consider. This specific type of insurance helps to protect businesses against the financial burden of unexpected overhead costs in the event of a disability or illness that prevents the pharmacy business owner or co-owner from working. Business Overhead Insurance can cover expenses such as rent, utilities, employee salaries, and other operational costs that need to be paid regardless of whether the business owner or co-owner can work.
Ultimately, by having this type of insurance in place, you can ensure that your pharmacy can continue to operate and thrive even in the face of unforeseen challenges. It provides peace of mind and financial security for you and helps to safeguard your pharmacy business’ financial stability in times of need.
Who is Business Overhead Insurance For?
Business Overhead Insurance is designed for small business owners between the ages of 18-65 who want to protect their company if they are unable to work due to a disability, making it a great insurance option for pharmacy owners. However, if you aren’t sure if it’s right for you, it’s always best to discuss this with your accountant, insurance advisor, or another tax professional.
How Payment Works, What is Covered & What Isn’t Covered
Coverage is available from $500 to $30,000 in monthly benefits, in increments of $100, however, the insurer won’t pay you more than the actual expenses incurred for up to 24 months. Shorter periods are also available for 12-18 months.
The cost of insurance will depend on a few factors such as your age, your gender, if you’re a smoker, the elimination period, and the benefit period. The benefits will stop as soon as you can return to work. As mentioned above, eligible business expenses include things like:
- Rent
- Property taxes
- Utilities
- Employee salaries
- Capital cost allowance
- Car insurance/loans
- Maintenance services
- Rental equipment
- Payroll taxes
- Recurring accounting services
What Isn’t Covered
Expenses that will not be covered by Business Overhead Insurance include:
- Bad debts
- Employee bonuses
- Your salary
- Legal fees
- Charitable contributions
- Travel costs
- Educational costs
What is the “Elimination Period”?
The elimination period is the number of days you have to wait to receive your monthly benefits after you’ve been disabled. The shortest elimination period is 30 days, the longest is 90 days. Ultimately, the shorter the elimination period is, the better as your business will have to survive without it until the benefits kick in.
Is Business Overhead Insurance Tax-Deductible?
Unlike most types of insurance, yes, it is tax-deductible. Premiums for Business Overhead Insurance can be written off as a business expense, but any benefit payments are considered taxable income, therefore, the benefit payments are then used to pay tax-deductible expenses.
Remember, This Insurance Doesn’t Cover Your Salary – You’ll Need a Disability Insurance Policy
Disability Insurance (DI) is used to provide income protection if you become disabled and are unable to work due to an illness or injury. This type of insurance is particularly important as your ability to work is directly tied to the success of your pharmacy business. When you purchase a personal disability insurance policy, you typically pay a regular premium to the insurance company. In return, the insurance company will provide financial support if you become disabled and are unable to work. This financial support is designed to replace a percentage of your income and help you cover the costs of living expenses while you are not able to work.
It’s important for you, as a pharmacy owner, to carefully review the terms and conditions of your disability insurance policy to understand what types of disabilities are covered, how much your benefit payments will be, and how long you will receive these payments. Some policies may also offer additional benefits such as rehabilitation services to assist you in returning to work.
Ensure Your Pharmacy is Thoroughly Protected
It may be hard to think about it, but what would happen to your pharmacy business if you couldn’t work? How will it run or operate? Depending on where you’re at in your pharmacy business journey, it could result in bankruptcy if you don’t have proper plans in place to keep your business running if you are injured, disabled, or fall ill. This is where Business Overhead Insurance comes in – this type of insurance policy is designed to help you cover the costs of various business expenses while you are unable to work so you don’t have to stress about filing for bankruptcy. If you have any more questions about how this type of insurance works, reach out to a professional tax accountant such as those at Pharma Tax who can ensure your business is as successful as possible.
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