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Business Disability Insurance

For small business owners in Canada, business disability insurance could be the right choice to protect their valuable investments. There may be an ongoing debt obligation, lease and rental payment, employee wages, insurance costs and in the event of you or a key person or business partner becoming disable, your business disability insurance could provide the much needed coverage to you as well as your business partner.

Business Overhead Expense Insurance

If the owner of the business becomes disabled for any length of time, the Business overhead expense (BOE) disability insurance pays the business overhead expenses. The amount paid is a monthly benefit that is based on actual expenses and does not depend on anticipated profits. This type of insurance is suitable for businesses that depend on a small number of people (or a single person) for making revenue.

For eligibility, applicants should be Canadian resident and under 65 years of age.


Coverage by BOE

A BOE disability policy typically provides coverage for the following business overhead expenses.

  • Rent
  • Utilities
  • Accounting fees
  • Equipment maintenance
  • Employees’ salaries and payroll taxes
  • Taxes on the business property location
  • Professional memberships and subscriptions
  • Rental, lease, or depreciation of office equipment
  • Insurance premiums for Workers’ Compensation, employee medical, and liability

The salary of a temporary employee hired to work in place of the disabled is not covered within the policy, unless there is a substitute salary expense or similar rider bought along with the policy. Expenses like inventory cost and income taxes are not covered by BOE.

Determine the benefit amount to apply

The coverage you may purchase should be equal to the average fixed monthly expenses in the last six months after deducting any business expense or office overhead coverage already existing. Coverage ranges from &500 to &8,000 in $100 units as monthly benefits.

The start of benefit payments follow the Elimination Period that you selected during your application and could be 14 days or 30 days. Do remember, the longer is your Elimination Period, the lower will be your premium.

However, benefit payments are limited to the actual expenses incurred.

Let BOE always gives coverage for business expenses

Disability Overhead Expense Insurance is quite a popular insurance plan among business owners of Canada. This is because in the event of you or your co-owners becoming disabled for a period of time, your BOE provides the coverage for business expenses as your revenue slows down.

We at Life Guard Insurance will help you understand and provides the right policy structure for you and your co-owners.

Details of Business Overhead Expense Insurance:

  • Your plan has guaranteed premiums locked in until the age 65. It can further continue, with yearly renewable of premiums after 65 years, till you are employed full time (30 hours per week minimum) and also responsible to meet expenses of office or business.
  • Decide whether you need benefit to be paid over a period of either 15 or 24 months, to cover fixed business expenses like payroll, rent and utilities, property taxes, for up to 2 years.
  • Benefits could start after as few as 15 days of disability, thus letting your business to remain a going concern until you are fit enough to return to work.
  • Depending on your need, monthly benefits range from $500 to $30,000 per month.
  • Premiums may be tax deductible.
  • Different enhancements are available to add value to your policy.
  • Includes Return to Work Assistance if your insurance company finds right.

Key Person Disability Insurance

Key Person Disability Insurance is a protection for companies in the event of losing a key employee due to potential disability. This type of plan helps a company to remain profitable after losing a key member of the team. For short-term disability, the company can make use of the money to hire a temporary employee. And, if the disability seems long-term, the money could be used to meet the cost of training, recruitment, and startup of a replacement employee.

However, the definition of disability with respect to Key Person Disability insurance and other disability insurance policy is important.

The following are the three definition of disability that determines the eligibility for injury and illness insurance contracts.

Total disability

‘Total disability’ under this definition means inability to work at any occupation. For example, if a computer consultant becomes disabled, and is unable to do the regular occupational duties, but is able to gainfully work as a checkout clerk is ineligible for this type of policy. 100% of your disability benefit will be paid.

Partial Disability: “Partial Disability” means losing at least 50% of time away from work or being unable to do an important function of your job. 50% of your disability benefit is paid to you.

Residual Disability: In case of “Residual Disability”, the person is capable for doing work, but is unable to earn an income due to disability. Benefit will be in proportion to the percentage income loss. For example, if you earn 40% less income this month due to disability compared to last year, you are paid 40% of if your disability benefit.

Details of Key Person Disability Insurance:

  • The insurance company will not be able to cancel your plan until the insured person is over 60 or stops working as a full-time with your business.
  • Key Person Disability Insurance provides a minimum benefit of $2,500 per month for 12 months, and a maximum benefit of $15,000 per month for 12 months.
  • Benefits to begin after 60 or 90 days of Total Disability.
  • Persons aged 18 to 55 can buy coverage.

We at Life Guard Insurance can design a Key Person Disability Insurance to protect your business in Canada.

Disability Buy-Sell Insurance

The Disability Buy-Sell Plan is ideally suited for owners of privately-held businesses. With Disability Buy-Sell plan, the remaining insured partners or shareholders are able to buy the business interest from the disabled partner or shareholder who is unable to work.

It is important to have a formal disability buy-sell agreement, as the terms of the buy-out is governed by it. The agreement should be drawn by your lawyer, while the funding comes either from retained earnings, future revenues or an insurance policy.

Life Guard can design a Disability Buy-Sell Insurance policy to complement your legal agreements.

Details of Disability Buy Sell Insurance:

  • There is guaranteed lock-in premium of the plan till the insured person reaches 64 years of age or stops working as a full-time with your business.
  • Terminates full-time employment with the business.
  • There is a maximum benefit amount of $1,000,000; you opt to receive payment on monthly basis, a single lump sum or a mix of the two, whichever is more tax-efficient for you.
  • After 360 days of Total Disability, when it is expected that you or your partner is returning to the business soon, the benefits become payable.
  • The corporation or partnership may own the policy, or each owner can buy a policy on each of the other owners.
  • The company must have a net worth of minimum $50,000 and may be a partnership or professional corporation with a presence of at least three years.