Disability Business Overhead Expense Insurance

By guest author Lawrence B. Keller, CLU, ChFC, CFP?

As the owner of a medical or dental practice, you are the key to its success. Your patients and staff rely on you. If you become disabled, you may be unable to provide the services your patients expect or the leadership that your employees need.

Overhead Expense disability insurance is a cost effective way to ensure that your practice can meet its ongoing expenses during a period of disability. Protecting your practice from financial loss is important whether you eventually return to work or decide to sell your practice. Just as individual disability income insurance can help you pay your living expenses while you recover from a serious injury or illness, Overhead Expense disability insurance can help you to keep your medical practice healthy.

Business Overhead Expense insurance is a cost effective way to ensure that your business can meet its ongoing expenses during a period of disability by reimbursing the owner(s) of a practice up to 100% of the normal ongoing business expenses incurred during a disability, including items such as:

  • Rent
  • Electricity
  • Telephone
  • Heat
  • Water
  • Laundry, janitorial and maintenance services
  • Employee salaries
  • Employee benefits
  • Real estate taxes
  • Property, liability and malpractice insurance
  • Interest on debt
  • Depreciation
  • Rent or lease expense of furniture or equipment
  • Legal and professional services
  • Professional, trade, and association dues
  • Licensing fees
  • Billing and collection fees
  • Other tax-deductible business expenses
  • Salary for your replacement (depending upon insurance carrier)

Typically, monthly benefits up to $50,000 are available with benefit periods up to 30 months. While this may seem to be a substantial amount of coverage, it is not uncommon to find healthcare practices with overhead expenses that far exceed this limit. As a result, special risk insurers, like Lloyd?s of London, are able to supplement the traditional market with monthly benefits in excess of $250,000.

Premium payments for Overhead Expense insurance are tax-deductible as a reasonable and necessary business expense (Rev. Rul 55-264, 1955-1 C.B. 11). As such, benefits received during disability, while taxable upon receipt, are used to pay practice related expenses, which are tax-deductible. The net tax result is a ?wash? so the net tax impact is neutral.


While most doctors and dentists are keenly aware of the need to purchase individual disability insurance coverage, few are aware of the importance of Disability Business Overhead Expense insurance.

Lawrence B. Keller, CLU, ChFC, CFP? is the founder of Physician Financial Services, a New York- based firm specializing in income protection and wealth accumulation strategies for physicians. He can be reached at (516) 677-6211 or by email to Lkeller@physicianfinancialservices.com with comments or questions.

Will mortgage rate increases cool a hot housing market?

By our guest writer Bob Cahill:

Of course no one really knows if the increase in mortgage rates will cool a hot housing market.? The answer depends on factors that are worth watching in the coming months, ?especially if you?re in the market to purchase.

First of all, positive economic conditions and improved employment have resulted in the Fed forecasting their Bond Purchase exit strategy that will likely begin soon and complete some time in 2014 if economic, employment and inflation conditions meet expectations that the Fed has outlined. This mention by the Fed has resulted in a major sell-off in mortgage bonds and treasuries which have increased treasury yields and rates on conventional 30 year fixed rates by approximately 1%.

Second, home sales and values may actually see some near term additional increase due to buyers that are in the market now looking to move more quickly to lock in rates before they continue to rise.? However, the impact on future values and sales is the concern that we?re all apprehensive about especially considering how important a strong housing market is to the broader economy, consumer confidence and our own personal home ownership dreams.

To attempt to quantify a 1% rate increase for a family earning $100,000/yr and purchasing a home with a $400,000 mortgage I?ve calculated the increased monthly cost and impact on total monthly debt.? This resulted in an increased housing expense of ~$230/m or ~3% in terms of total debt from say 34% to 37%.? The impact to a higher net worth families will of course be less significant.? It?s my opinion that the current demand in the housing market will be able to absorb such an increase and 30 year rates in the 4.50% to 5% range but the markets will be the only one to determine what can and will be tolerated.

Considerations if you?re in the market to purchase:

  • Interest rates swings on a daily and weekly basis during the current market have been significant
  • Budget total housing payment based on current interest rates at time of loan pre-approval
  • Obtain interest rate quotes at the time you?re presenting an offer so you know what your payments will be
  • Be prepared to lock your interest rate once your offer has been accepted especially during current volatile times
  • You can of course also float your rate and lock later but this should be managed closely
  • Impact of higher rates and monthly costs typically impact first time buyers more significantly

Bob Cahill is a Senior Mortgage Banker with Leader Bank N.A. (www.leaderbank.com/agent/cahill).? He can be reached at 781.589.8756 or email rcahill@leaderbank.com.

  • Stay in close contact with your mortgage professional when purchasing

Spring Clean Up Project #3: Your Credit Report

Currently, three companies, Equifax, Experian, and TransUnion, track everyone’s credit histories. Don’t forget that banks, lenders, retailers, landlords, and other “credit grantors” use credit reports generated by these companies to determine your creditworthiness. Why not take this opportunity to clean up incorrect or misleading information reflected on your credit reports?

Your credit report reflects quite a bit of information about you and your financial affairs.

  • The bulk of your credit report focuses on your various loans and credit card accounts. Included is the name of each?of your creditors, as well as the type of account, the minimum monthly payment, the account’s limit or high balance, and the current outstanding balance.
  • Your credit report also reflects the most recent twenty-four month payment history for each creditor, showing whether each month’s payments were current, delinquent, or in default.
  • Another section on your credit report details inquiries that were made by potential creditors. In this section, the name of the creditor and the date of inquiry are listed for each request that has been made.
  • Your credit report also includes “public?records” such as tax liens, bankruptcies, and judgments made against you. Most public records remain part of your credit history for seven to ten years. If you have any tax liens, they won’t be removed from your credit report until they are paid off.

The best way to find out how your credit report looks is to order one from time to time. You’re allowed to order three free credit reports per year – one from each credit bureau – through annualcreditreport.com. If you find errors on your credit report, or accounts listed as open that had previously been closed, reach out to each credit reporting agency to have those items cleaned up as soon as possible.

IRS Online Tax Tools for Small Business and Self-Employed

From IRS Tax Tips News:

You don?t need to be a tax expert when you?re running a business, but you may need to know the basics so your business can run smoothly. The IRS.gov Small Business and Self-Employed Tax Center has useful tax information and services for business owners.

The tax center can help whether you are starting, operating or closing a business. You can apply for an Employer Identification Number online or get a form you need. If you want employment tax information, the center has it. It also offers tools and resources:

  • IRS Video Portal.? Watch helpful?videos and webinars on a variety of topics from filing and paying your taxes to understanding the IRS audit process.
  • Online Tools.? The Tax Calendar for Small Businesses and Self-Employed features e-filing and e-paying options,? alerts for important filing dates and tax tips. You can order a wall calendar or install the IRS CalendarConnector and access important tax dates for small businesses right from your desktop.
  • Small Business Events?and Educational Products.? The online Virtual Small Business Tax Workshop has nine interactive lessons designed to help you understand and meet your federal tax obligations. You can also find free IRS small business ???? workshops and other events planned in your state.

Go to the Small Business and Self-Employed Tax Center and use the A-Z index to find whatever you need.


Check out Rev-Proc 2013-13 to learn about a simplified way that taxpayers can calculate the home office deduction starting in 2013. Here is the press release issued by the IRS:

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year

IR-2013-5, Jan. 15, 2013

WASHINGTON ? The Internal Revenue Service today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after Jan. 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

  • E-mail to: Notice.Comments@irscounsel.treas.gov.?? Include ?Rev. Proc. 2013-13? in the subject line.
  • Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
  • Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier?s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.