Beyond personal income protection, the exam tests two business-specific disability applications.
Business overhead expense (BOE): if a self-employed professional becomes disabled, operating expenses continue even though revenue stops. A BOE policy reimburses eligible overhead expenses (rent, staff salaries, utilities, loan payments) during disability, up to a monthly maximum and for a limited benefit period, usually 12 to 24 months. BOE benefits are a taxable business receipt offsetting the deductible expenses. Individual disability income benefits are generally tax-free when funded by after-tax premiums (see the Underwriting, Claims, and Tax module).
Disability buy-sell (partnership buy-out): when a partner or shareholder becomes permanently disabled, the remaining partners need funds to buy out the disabled partner's interest. A disability buy-sell policy provides a lump-sum or periodic benefit, linked to a buy-sell agreement, that funds the purchase. The definition of disability in a buy-sell context is typically more stringent and requires a longer period of total disability before the trigger applies.
Key person disability: a business can insure against the income or revenue loss caused by the disability of a key employee whose skills are difficult to replace. The business owns the policy and is the beneficiary.