Which policy would a disabled business owner use to cover ongoing payroll and other overhead expenses if the owner becomes disabled?

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

Answer: (B)

When a business owner becomes disabled, the priority is keeping the business running and paying the ongoing costs. A policy that covers ongoing overhead expenses is designed for this purpose. Business Overhead Expense insurance is purchased to reimburse the business for ordinary operating costs—like payroll, rent, utilities, and other fixed expenses—while the owner is disabled and unable to work. The benefit goes to the business to keep operations afloat, rather than paying out to the owner as personal income. This helps prevent layoffs, creditor issues, or a forced shutdown during the owner's recovery.

Disability income insurance, in contrast, is meant to replace the owner's personal income when they are unable to work, not to cover company expenses. Term life provides a death benefit if the insured dies, with no relation to ongoing disability costs. Buy-sell is a plan to govern ownership transfer if the owner becomes disabled or dies, typically funded to buy the owner's stake, not to cover day-to-day overhead.