D BUSINESS OVERHEAD EXPENSE INSURANCE WHAT IT MEANS TO A SAVVY BANKER BY ANDY PHILLIPS, BENEFIT & FINANCIAL STRATEGIES LLC Dr. Steve P. is a 65-year-old physical therapist. He spends his free time fishing and enjoying the great outdoors. Two years ago, he was visiting his aging parents in Idaho. After helping them get their garden in, he drove to Idaho Falls, Idaho, to help his brother install a sprinkler system in their yard. Part way through, he began to feel tired and dizzy. Even after lying down for a while, the symptoms continued. His brother rushed Steve to the hospital where they determined he’d had a stroke. Dr. Steve P. owns a physical therapy practice and has been in business for 36 years. His family relies on him for their well-being, as do several employees and their families. A stroke can be very debilitating. In a worst-case scenario, the individual may never work again. This could happen to anyone. What was the impact on their financial condition? Could cash flow support a temporary PT doctor and continue paying Scott and his wife to meet the business’s mortgage payment, plus other debt obligations? In the landscape of modern business, safeguarding against unforeseen challenges is paramount. One such critical safeguard is Business Overhead insurance. Often overlooked by businesses, owners AND bankers, this form of insurance provides financial stability and continuity for businesses when key employees or business owners are unable to work due to disability. Let’s look at some of the benefits and why it should be an essential component of lending risk management. 1. Financial Security and Stability When a key employee or business owner becomes disabled (partial or permanently), the business can face significant financial strain on cash flow which can impede their ability to meet debt servicing along with essential expenses such as salaries, rent and utilities, which we all know get paid before your loan payment! 2. Protection of Key Employees Key employees often possess skills, knowledge and relationships that are vital to the business’ success. Losing such an employee to a disability can be devastating. Business Overhead Expense insurance can cover the cost of recruiting and training a replacement which can be crucial to maintaining business continuity and sustaining customer/client relationships. For many businesses, the absence of a key employee can halt operations and ruin business reputation and customer trust. Continuity is essential for long-term success, stability and debt servicing. GUEST ARTICLE Community Banker 21
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