Massachusetts Health & Accident Insurance Practice Exam

What does business overhead expense insurance primarily cover?

1. Compensation for business owners

2. Reimbursement for day-to-day operating expenses

3. Benefits for key employees

4. Returns on business investments

The correct answer is: Reimbursement for day-to-day operating expenses

Business overhead expense insurance is designed to cover the everyday operational costs that a business incurs in the event of the owner's disability or inability to work. This type of insurance helps ensure that essential bills such as rent, utilities, payroll for non-key employees, and other operational expenses can be met even when the business owner is not present to generate revenue. By providing reimbursement for these day-to-day expenses, this insurance allows the business to maintain its operations and potentially remain viable until the owner can return. Other options do not fully capture the purpose of this type of insurance. For instance, compensation for business owners pertains more to income replacement rather than operational costs, benefiting key employees focuses on specific essential staff rather than the overall business operations, and returns on business investments are related to profit rather than ongoing expenses. Business overhead expense insurance is specifically tailored to address the continuing costs of running the business during the owner's absence.