a previous segment on disability income uh policies and insurance I talked about the implications about becoming about an individual I guess becoming disabled uh as it applies to the business Marketplace and so if we have a small business and uh we talked about the implications and the risks to that business if in fact one of the key shareholders or one of the key employees uh becomes disabled uh it can be a significant issue I don't know if any of you are in the restaurant business but if your Chef uh is sick one day or sick for two or three months uh that has a significant implication for that business so uh as we know there are two or three people usually are key to many small businesses and if something happens to that uh person they're unable to uh be at work for short or longer term uh that can be a significant risk to the business and so when we talk about risks to a business owner uh statistics have shown that for the average 45y old male there is a 40% chance of suffering a disability lasting longer than 90 days prior to age 65 so that's a significant uh risk and in fact in many situations the average duration of of the disability tends to be around four years 4.3 years statistically so uh 40% of males age 45 could incur a disability uh lasting 90 days or longer uh for uh in the case where they are in fact uh disabled it can last up to 4.3 years so significant implication if that person is a key person in a small business operation now if one of the principles becomes disabled and is unable to continue to work there is an issue and in fact someone needs to take over the ownership management and running that company uh if that uh shareholder or partner is unable to come back to the organization and function at 100% uh capability and in many cases uh that business tends to be the key asset for the family and so the family's retirement income the family's ongoing income is all linked to the business so if the principal is unable to function uh up to capacity there are significant implications for current income to the family and also future retirement income as because in most small businesses the objective here or the Hope here is that when it's time to retire we're going to be able to sell that business and use the proceeds to fund our retirement income so becoming disabled puts a real spanner in the works with respect to those financial planning goals and objectives and similarly it doesn't have to be a shareholder could be a key employee if you lose a key employee uh could be your key disabil sorry could be your key salesperson could be your key it person if you are in uh software development company doesn't matter there are key people in every company and so businesses are at risk if those individuals become disabled whether it's a short term or long term so the insurance industry is providing products that can allow these types of issues to be at least softened or managed uh through providing disability income coverage I want to talk today uh about uh one specific type of policy which is called a business overhead expense policy and so disability business overhead expense is designed to keep the doors of a business open while uh the principal might be disabled for a short term so in many situations uh as we know the principal tends to be the individual that's generating the income this could be a dental practice could be a Doctor's practice uh it could in fact um be a pharmacy where as you know unless the pharmacist is there no dispensing of drugs can take place and in a lot of uh metropolitan areas uh pharmacies uh reol drugs or Shoppers Drug mark would in fact have roving Pharmacy pharmacists that can go around and assist those pharmacies uh in the event that one of the owners or one of the key pharmacists becomes disabled however however if you're in a smaller town in a smaller location outside the Metro areas uh this becomes a significant challenge uh if the pharmacist cannot show up uh you cannot dispense any drugs and that business is going to suffer if the dentist is not there uh no income is being generated and the assistance the hygienists and the people working in that dental practice are no longer going to be able to be paid and so if I have a toothache the reality is I'm going to go to another dentist so I those that business stands the risk of losing customers to a new relationship that could be formed so making sure we can keep the doors open is very uh important uh during a shortterm or longer term disability so disability business overhead expense policy provides enough uh sorry provides a monthly payment to cover business overhead now what do we mean mean by business overhead well that's simply uh things that keep the door open light uh utilities you we may have rent that we have to cover uh we may have salaries of our staff so all of these things are overhead and if in fact the principle of that business is not functioning is not able to work then the business has no income coming in and it's going to have a problem Meeting those expenses so uh business overhead expense policy is designed to meet the needs of small business owners uh it's an own occupation definition which is the uh you know the topnotch definition and so if the business owner is unable to perform the duties of their own occupation then the claim this uh they would qualify as being disabled under the policy and can put through a claim now the benefits that are paid under this are based on actual business expenses so the business will submit their expenses each month and these expenses will be covered obviously up to the maximum that the owner had purchased the interesting thing about this is as you know businesses don't always have the same expense every month the expenses can vary so one month we may have $5,000 of expenses uh the following month it might be $8,000 of expenses in those months let's say for example uh we have a policy that provides coverage of $6,000 of expenses per month if in fact you don't use up those $6,000 that month the unused portion can be carried forward to the next month or you can carry forward those uh uh coverages sorry th those expenses and they would be covered under the overall average of $66,000 per month the benefits that are paid in the event uh claim is put through are taxable income to the uh company because you're basically replacing the income that that disabled person would have generated and so premiums for the business overhead policy are deductible expense to the business but the benefits are going to be taxable because it basically is replacing income that the owner would have generated so let's look at what is actually covered under a disability business overhead expense policy well first of all it's going to cover rent going to cover property taxes that may be involved any business taxes utilities equipment leases the company may be leasing equipment and have a monthly payment these are covered telephone internet legal and accounting fees any interest on loans and employee salaries so all of those expenses are going to be covered under this policy so that you're going to make sure you can keep the door open and you can keep customers coming in now we need to have someone that's going to be replacing the owner because if the customer comes in to get their teeth filled and there's no dentist there we have a problem so what's interesting on this is that the salary of the disabled owner or the replacement of that owner is not covered under this policy in addition New Capital expenditures you can't go out and buy new equipment while you're on claim uh and only the interest portion of loans are covered not the principal repayment of capital so how come it doesn't cover the replacement employee well the reality is if you have a temporary dentist or pharmacist in there that individual is going to be generating income and they are going to be paid from that income so important to remember that disability business overhead expense policies the owner or the replacement for that owner they are not covered in fact the owners if they become disabled they should have their own individual policy this business overhead policy is to cover the expenses and the overhead for the business