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Overhead Expense (18OE)

More Benefits, Mlore Programs and More Savings!   This updated Overhead Expense (Policy Form 18OE) released 4/20/20 and replaces OE (Policy Form 4200) in states where approved.  Overhead Expense provides benefits to reimburse many normal and customary fixed monthly business expenses during a business owner's disability.


OE Basics:

New 18OE State Availability Why Overhead Expense (OE)How Overhead Expense (OE) Works




Features and Riders: 

Overhead Expense (OE) Policy FeaturesOverhead Expense (OE) Optional Riders




Taxation, Deductability, & Discounts: 

OE Benefits & Tax AdvantagesOE Policy Potential Discounts




Specimen Policy

Overhead Expense (OE) Specimen PolicyOverhead Expense Product Page Outline








New OE (Policy Form 18OE) State Availability

The new Overhead Expense product is now approved in all states.

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Why Overhead Expense (OE):

As a professional services business owner would you be able to pay your employees, utilities, liability insurance, and other business expenses in addition to paying your own bills if you became too hurt or sick to work?  Even if you have adequate group long term disability & individual disability protection, you may have just enough to pay your living expenses.  This means that you won't be able to keep your business going for very long if at all.  Since you are a successful business owner, your business has value and is part of your net worth.  However, if your business falls apart shortly after a period of disability, how much would it be worth then?  There are two main reasons why you want to own OE:

  1. If You ARE Going to Recover:  OE reimburses your covered business expenses during a disability to keep your business going while you recover so you can come back to a fully functional business.

  2. If You ARE NOT Going to Recover:  OE reimburses covered business expenses during a disability to keep your business going and functional, so you can sell your business for the full market value.   

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How Overhead Expense (OE) Works:

In the event of disability, policy owners are reimbursed up to 100% of covered business expenses each month, up to a maximum monthly overhead expense benefit amount specified in the policy.  Any unused monthly benefit may be carried forward and may be used towards covering subsequent months where the monthly expenses exceeded the monthly maximum or may extend the benefit period for a period of no more than 12 additional months.

The covered expenses are all the normal, necessary and customary expenses incurred to run your business including but not limited to:

  • loan payments
  • rent
  • utilities such as: Electric, telephone, heat, water
  • salaries and employer-paid benefits of employees who have no ownership interest in your business and who are not members of your profession
  • business insurance such as: property, liability and malpractice 
  • health insurance  
  • real estate taxes
  • interest on business debt
  • depreciation
  • janitorial, maintenance, & laundry services
  • legal and professional services
  • professional, trade and association dues
  • licensing fees
  • billing and collection fees

The premiums for your OE policy are fully tax deductible as a normal business expense.  The benefits are technically taxable but since they are reimbursing you for business expenses you paid, the net result is a wash with no taxation of benefits*.

With an OE policy you have three choices for waiting periods:  30, 60 & 90 days.  You also have three benefit period options: 12, 18 & 24 months.  We usually recommend a 30 day wait and a 1 year benefit period.

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Overhead Expense (OE) Policy Features1,2:

  • Non-Cancellable and Guaranteed Renewable to Age 65:  As long as your premiums are paid the policy will remain in force until age 65.  additionally no policy rates or language can be changed.  After age 65, as long as you are working full time 10 month a year in the business and are responsible for business expenses, you can continue coverage under the renewal conditions of the policy.

  • Own Occupation Definition of Disability:  You are considered totally disabled if, due to injury or sickness, you are not able to perform the material and substantial duties of your occupation.

  • Accelerated Benefit Endorsement:  This exceptional hard to find feature helps you with cash flow during a claim.  In the event of total disability, 30 days after you have satisfied the elimination period, 100% of the maximum first monthly overhead expense benefit is paid before requiring proof of covered expenses. Yes you receive your first policy benefit check days after satisfying your elimination period, not months.  Most companies do not have this feature which means you must wait until after the end of a covered month to submit documentation for policy benefits in all situations. With this feature the amount is paid only one time in the same claim.  Note: this endorsement is included on most issued policies but not on all policies.

  • Ability to Carry Forward Unused Benefits (Extension of Benefits Feature): Benefits for either a residual or total disability may continue beyond the end of the benefit period, for a period of no more than 6 additional months, if the Maximum Aggregate benefit in a single claim has not been paid.
  • Waiver of Premium Benefit:  Premiums are waived during a disability when you are eligible for benefits and for six months following recovery.  Any premium paid that is attributable to the disability period is refunded. 
  • Legal and Accounting Fee Benefit:  Reimbursement for up to $5000 of legal and accounting fees.

  • Conversion Option:  You have the ability to convert an OE policy into an individual disability insurance policy up to age 60 with a 90 day waiting period and a two year benefit period. 

  • Overhead Level vs 5 Year Graded Premium Structure:  For budget flexability you can choose at time of issue a level premium or a lower initial premium that automatically converts to attained age premium in the 5th year.

  • Payment Options: Annual, Semi-Annual, Quarterly, Monthly List Bill, and automatic monthly draft.  Modal charges apply to Semi-Annual, Quarterly, Monthly draft (GOM), & Monthly List Bill.

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Overhead Expense (OE) Optional Riders1,2:

  • Future Increase Option (FIO) Rider:  This rider provides the ability to purchase additional coverage without having to prove good health, you will just need to provide financial justification for the increased benefit.  This option can be exercised each year on the policy anniversary date up to age 55 or until the total increase option is used up if sooner.  The total FIO amount issued on a policy can not exceed one times the base monthly benefit and the base plus FIO amount can not exceed the published OE maximums for that benefit period noted below.  

  • New: Benefit Purchase Rider (BPR):  This is a free version of an increase rider similar in concept to the FIO rider with limitations & restrictions that make this rider a no cost option.  The BPR allows you to purchase additional coverage every three years in the form of a separate policy with no evidence of insurability with just financial and occupational underwriting up to age 55.  Every three years the insured must provide income documentation and complete paperwork to determine eligibility for increased coverage.  If the insured fails to apply for any three year review or does not take at least 50% of the eligible additional coverage, then the future BPR options are forfeited.   The BPR also offers a special option date which can be exercised outside of the normal three year window for the loss of underlying group long term disability coverage (LTD).  While medical information is not required when applying for additional coverage pursuant to the Benefit Purchase Rider, applications will be financially underwritten taking into consideration the insured’s then current income, occupation, and employment, as well as all disability insurance which is then in force, or for which the insured has applied or is eligible to receive.  Coverage may not be added while the insured is disabled, when benefits are payable, or during a suspension period.  Additional Restrictions and limitations apply.  Consult with your agent to determine if the FIO or BPR is best in your particular situation.

  • New: Additional Overhead Benefit Rider This rider provides an additional benefit equal to the maximum monthly overhead expense benefit.  This benefit may be used in any month when your covered overhead expenses exceed the maximum monthly overhead expense benefit.  Any unused portion of this benefit may be carried forward for up to 6 months beyond the policy benefit period.

  • New: Partial Disability Benefit Rider:   This option essentially provides benefits when you’re working but your gross monthly revenue is reduced by at least 15% as a result of the illness or injury that caused you to become disabled.  To qualify for benefits you must be unable to perform one or more of the material and substantial duties of your occupation, or if you can perform all of the material and substantial duties of your occupation you must be unable to perform them for the length of time normally required.

    Benefit are payable in proportion to your loss of gross monthly revenue up to the maximum monthly benefit.:

       -If the loss of income is more than 75% of your prior gross monthly revenue in any month, we consider the loss to be 100%.
       -For the first six months, we’ll consider the loss of income to be at least 50% if you meet the definition of partial disability.

    Overhead Expense Recovery Benefit – we will continue to consider you partially disabled for a maximum of 12 months if:

       -If, after receiving Overhead Expense partial benefits you have returned to full time gainful employment, and
       -Your loss of gross monthly revenue is still at least 15%, and solely due to the illness of injury that caused your partial disability.

  • New: Business Loan Protection Term Rider:  This rider helps safeguard your ability to continue making your business loan payments should sickness or injury prevent you from working.  The Business Loan Protection Rider can be used to cover Business start-up or practice purchase loans, capital improvement or expansion loans, employment contract guarantees,
    or other contractual or financial obligations that require fixed periodic payments lasting five years or more.

    This rider provides coverage for a specified period of years from the policy date. When a qualifying total disability occurs, reimbursement benefits are only payable during the remaining portion of the term that has not elapsed when the disability begins.

    What can the Business Loan Protection Term Rider be used for?:

       -Business start-up or practice purchase loans
       -Capital improvement or expansion loans
       -Employment contract Guarantees

  • New: Enhanced Professional Replacement Rider This rider provides an additional overhead expense benefit amount to be used for reimbursing salary paid towards hiring a replacement while you are disabled.  The professional replacement is a person
    who is a member of your profession hired to replace you in the business and is paid a reasonable and customary salary to perform duties similar to those performed by you prior to your disability.  The benefit of this rider can be purchased up to $20,000 a month but the benefit of this rider can not exceed the base benefit.   Total Professional Replacement Rider plus Business Loan Rider can not exceed $20,000 a month per applicant.

  • New: Your Income Protection Rider This rider provides basic individual disability income coverage to business owners that have no existing (or applied for) disability insurance.  The maximum rider benefit amount that can be purchased is $5000 a month.

  • Automatic Benefit Enhancement (ABE) Rider: This convenient, no cost rider helps keep your OE insurance benefit aligned with normal, annual business expense increases you might experience when healthy.  It is applied automatically to eligible policies and provides an annual 4% compound benefit increase each year for 5 years not to exceed isue limits, with no financial documentation required.  Each increase will include an additional premium based on your then current age.  You have the option to refuse any of the increases but two consecutive annual refusals will remove this rider from the policy.  Rider eligibility will be determined at the time of underwriting.

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Overhead Expense (OE) Benefits & Tax Advantages*:

The premiums for Overhead Expense are tax deductible as ordinary and necessary business expenses.

Overhead Expense benefits received during your disability are taxable upon receipt: however, they are used to pay business related expenses that are tax deductible, so the net tax impact is neutral. 

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Overhead Expense (OE) Potential Discounts:


  • Association Discount: 10%

  • Multi-Policy: 5% permanent discount  for any IDI  and OE policies purchased at the same time or when OE is applied for within six months of the IDI. 5% discount is on OE only.

  • Multi-Life: 20% gender distinct discount with 3 or more lives issued within 6 months 

  • Preferred Occupation Discount: 10% permanent discount available specified occupations including resident and medical students. 




Overhead Expense (OE) Specimen Policy:

Overhead Expense (OE) Specimen Policy 18OE 2-2022

Note:  Policy varies from state to state.   PA speciofic specimen is selected.  

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Overhead Expense (OE)Product Page Outline: 

New OE (Policy Form 18OE) State Availibility
Why Overhead Expense (OE)
How Overhead Expense (OE) Works
Overhead Expense (OE) Policy Features
     -Non-Cancellable and Guaranteed Renewable
     -Definition of Disability/Own Occupation
     -Accelerated Benefit Endorsement
     -Ability to Carry Forward Unused Benefits (Extension of Benefits Feature)
     -Waiver of Premium Benefit
     -Legal and Accounting Fee Benefit
     -Conversion Option
     -Overhead Level vs 5 Year Graded Premium Structure
     -Payment Options
Overhead Expense (OE) Optional Riders
     -Future Increase Option (FIO) Rider
     -New Benefit Purchase Rider (BPR)
     -New Additional Overhead Benefit Rider
     -New Partial Disability Rider
     -Overhead Expense Partial Rider Recovery Feature
     -New Business Loan Protection Term Rider
     -Business Loan Protection Term Rider Uses   
     -New Professional Replacement Rider
     -New Your Income Protection Rider
     -Automatic Benefit Enhancement (ABE) Rider
OE Benefits & Tax Advantages
Overhead Expense (OE) Potential Discounts
Overhead Expense (OE) Specimen Policy


*This website is provided for informational purposes only and should not be considered tax or legal advice. Please contact your tax or legal advisor regarding the tax treatment of the policy and policy benefits. You should consult with your own independent tax and legal advisors regarding your particular set of facts and circumstances. The information provided is not intended or written to be used, and cannot be relied upon, to avoid penalties imposed under the Internal Revenue Code or state and local tax law provisions.
1, 2. Optional riders are available for an additional premium.
1, 2.Individual disability insurance policy form 18OE underwritten and issued by Berkshire Life Insurance Company of America, (BLICOA) Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America, New York, NY. Product provisions and availability may vary by state. In New York: This policy provides disability insurance only. It does not provide basic hospital, basic medical or major medical insurance as defined by the New York State Insurance Department. For policy form 18OE, the expected benefit ratio is 50%. For policy form 18OE-F, the expected benefit ratio is 60%. The expected benefit ratio is the portion of future premiums that the company expects to return as benefits, when averaged over all people with this policy form. Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America (Guardian), New York, NY. Product provisions and availability may vary by state.  Guardian® is a registered trademark of The Guardian Life Insurance Company of America.

© Copyright 2020 The Guardian Life Insurance Company of America  

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Financial Representatives of the Guardian Life Insurance Company of America (Guardian), New York, New York. Financial Growth Partners is a wholly owned subsidiary of Guardian. The Guardian® Logo is a service mark of Guardian, used with permission. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. This website contains the opinions of the author but not necessarily those of The Guardian Life Insurance Company (Guardian), New York, NY or its subsidiaries and such opinions are subject to change without notice.  Important Disclosures:  Terms and Conditions    Privacy Policy

This website is intended for genereal public use.  By providing this concept, The Guardian Life Insurance Company of America, and their affiliates and subsidiaries are not undertaking to provide advice or reccomentations for any specific individual or situation, or to otherwise act in a fiduciary capacity.  Please contacvt a financial representative for guidance and information that is specific to your individual situation.

Individual disability income products underwrittten and issued by the Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA or provided by Guardian.  BLICOA is a wholly owned stock subsidiary of and administrator for the Guardian Life Insurance Company of America (Guardian), New York, NY.   Product provisions and availability may vary by state.

2023-157954 Exp 7/26