A&S: KEY PERSON INSURANCE, Business overhead Insurance (BOE) + Loan protection insuracne

Question 1

KEY PERSON INSURANCE

Answer 1

PROTECTS BIZ ITSELF–> KEY PERSON DISABILITY INSURANCE

I.E of key sales person dies, would devestate company, company gets policy on key employees life or disability, so if something happens they receive compensation to help the biz (i.e to train a replacement)

SHORT waiting period

Question 2

key person definition

Answer 2

someone integral to operation of business, their skills would be difficult to replace

for employees, NOT OWNERS

Question 3

Business overhead Insurance (BOE)

Answer 3

During biz owners disability, BOW reimburses certain overhead costs to help keep biz alive

Question 4

BOE:disability definition

Answer 4

• own or regukar occ: whether biz owner can do own occ

Question 5

BOE costs covered

Answer 5

rent
utilities
biz income taxes
salaries of most employees
phone
interest on biz loans – not principle
etc…..
~~~

Question 6

BOE costs not covered (5)

Answer 6

• principle pmts on loans
• new capital expenditures (i.e new furniture or equipment)
• salaray of employees who can generate revenue independently for biz–their efforst can cover their salary
• salary of disabled owner– should have own disability policy
• salary of family members hired after disabilit (may abuse it)

Question 7

comapnies BOE good for?

Answer 7

• small biz owners

Question 8

BOE waiting period + benefit period

Answer 8

Waiting period:
- very short (15-90 days bc small biz)

Benefit period:
- very short– usually only 24 months

Question 9

BOE max benefit amount

Answer 9

• max amount is monthly amt x 24 months
• usucally can carry fwd amounts not used in prior months (expenses not claimed, benefit room not used)
• can extend benefit period longer to ensure use full benefits

Question 10

BOE: determining max benefits under policy

Answer 10

policy in force until the 1st of:

• biz owner recovers and returns to work
• biz sold / shut down
• max benefit paid out

Question 11

biz loan protention disabiliuty ins (BLPDI)

Answer 11

potentially covers ENTIRE loan pmt amout (interest + principle) while biz oner disabled

• for small biz owners

Question 12

BLPDI: eligible loans

Answer 12

only some loans elegible:

• legitimate loan for biz purposes
• loan essential for success of biz (i.e mortgare loan, equipmet loan, line of credit
• interest on loan tax deduxtible
• issued by financial institution

Question 13

who qualifies for BLPDI?

Answer 13

INSURER CONSIDERS:

• Is company historically profitable
• how has it performed over the years
• net worth of biz (a-l)
• higher occ risk categories- i.e 4a