How Much BOE Insurance Do You Need? A Step-by-Step Coverage Worksheet for Canadian Business Owners
Choosing a BOE insurance monthly benefit amount should not be a guess. This worksheet-style walkthrough shows how to list your practice's or business's fixed overhead, total it into a realistic monthly figure, and think through the right benefit period.
Why Guessing at a Coverage Amount Is a Costly Mistake
One of the most common mistakes business owners make with BOE insurance is picking a monthly benefit amount that feels roughly right rather than one that is actually calculated from real numbers. Too little coverage leaves a gap between what the policy pays and what the business actually owes each month. Too much coverage means paying for protection the business does not need. A simple worksheet approach removes the guesswork.
Step 1: Build Your Fixed Overhead List
Start by pulling together every fixed, recurring cost your business is obligated to pay each month, regardless of whether you personally are able to work. These are the categories a BOE policy is generally designed to reimburse.
- Rent or mortgage payments on your business premises
- Employee payroll, including salaries and mandatory payroll costs
- Utilities such as electricity, heat, water, phone, and internet
- Business insurance premiums that keep running regardless of activity level
- Equipment lease or loan payments
- Business loan or line of credit payments
- Property taxes, converted to a monthly equivalent
Step 2: Add It Up and Convert to a Monthly Figure
Once every category is listed, add the numbers together, converting any annual or quarterly costs, such as property tax or annual insurance premiums, into a monthly equivalent so everything is on the same basis. The resulting total is a realistic starting point for the monthly benefit amount to discuss with an advisor. Notice what is deliberately left off this list: the owner's own personal income or draw, and variable costs like inventory or commissions tied directly to production, since those either fall on their own when activity slows or are addressed through a separate personal disability policy.
Step 3: Match the Benefit Period to Your Real Recovery Runway
The benefit period is how long the policy will keep paying if a disability continues, and it should be chosen based on realistic scenarios rather than the shortest or cheapest option by default. Consider how long it would take to find and train a replacement, arrange locum or associate coverage, or reach a reasonable point for reassessing the business's future, and weigh that against the elimination period, the waiting period before benefits begin, since a business with stronger cash reserves may be comfortable choosing a longer elimination period in exchange for a lower premium.
Get a Personalized Coverage Estimate From DMPG
Working through your own numbers is a great first step, but every business's overhead structure is different. Reach out to the DMPG Financial Advisory Team for a free, no-obligation consultation to build a coverage estimate tailored to your specific fixed costs.
Frequently Asked Questions
What overhead expenses should I include when calculating my BOE coverage amount?
Focus on the fixed, recurring costs your business would still owe even if you personally could not work, such as rent or mortgage payments, employee payroll, utilities, business insurance premiums, equipment lease payments, business loan or line of credit payments, and property taxes.
Does BOE insurance cover my own personal income or owner's draw?
No. BOE insurance is built around reimbursing the business's fixed overhead expenses, not the owner's personal salary or draw. Owners typically pair BOE coverage with a separate personal disability insurance policy to address their own income replacement needs.
Why are variable costs like inventory or sales commissions left out of the worksheet?
BOE insurance is designed around fixed costs that continue regardless of activity level. Variable costs, such as cost of goods sold or commissions tied directly to production, tend to shrink on their own if the business slows down, so they are generally not part of the fixed overhead figure used to set a BOE benefit amount.
How do I decide on a benefit period length?
A benefit period should reflect how long it would realistically take for the business to adjust, whether that means training or hiring a replacement, arranging coverage from another professional, or reaching a point where the owner could return to work. Policies are commonly available with a range of benefit period options, and an advisor can help match the length to your situation.
What is an elimination period and how does it factor into my coverage?
The elimination period is the waiting period between the start of a disability and when benefit payments begin, and policies are commonly available with a range of elimination period options. Businesses with more cash reserves on hand may be comfortable with a longer elimination period, while those with thinner reserves may prefer a shorter one.
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