A disabled business owner who has payroll and business expenses paid for has what kind of insurance policy?

• A. Buy-sell
• B. Disability income
• C. Term life
• D. Business overhead expense

Answer: (D)

When a business owner becomes disabled, a policy that reimburses the business for ongoing overhead costs is the right fit. Business overhead expense insurance is designed to keep the business running by paying for fixed expenses needed to operate, such as payroll, rent, utilities, and other overhead. The advantages here are clear: even while the owner is out, the business can continue to function and meet its obligations because the policy funds these essential costs.

This is different from a disability income policy, which would typically replace the owner’s personal income rather than cover the business’s expenses. It also isn’t about funding a sale or transfer of ownership (buy-sell) or about a death benefit (term life), both of which serve separate purposes. In short, because the scenario specifies keeping payroll and expenses paid to maintain the business, the appropriate type is business overhead expense insurance.