A 44 year old physiotherapist is the sole owner and sole clinician of her practice, which she operates through a single member limited liability company. She already holds a personal disability income policy that would replace her own earnings. Her concern is different: if a long illness kept her out of the clinic for six months, the practice would still owe surgery rent, reception staff wages, utilities and the equipment lease, and she wants those costs met so the practice survives until she returns. She has no co-owner and no intention of selling the practice. Which insurance solution best meets this stated need?
- AA disability buy-out policy, which pays a lump sum or instalments funding the purchase of a disabled owner's interest once the disability has continued past a lengthy elimination period.
- BAn increase in the monthly benefit on her existing personal disability income policy, sized so that the extra personal benefit can be contributed to the practice to meet the fixed costs while she is unable to work.
- CA business overhead expense policy, which reimburses covered fixed operating costs actually incurred during her disability, up to a monthly limit and for a benefit period typically measured in months rather than years. Correct
- DA business interruption endorsement on the practice's commercial property policy, which replaces lost income and continuing expenses while the business is unable to operate normally.
Why A is wrong: A buy-out policy is tempting because it also responds to disability, but it funds a transfer of ownership. With no co-owner to buy her out and no intention to sell, it pays for a transaction she does not want and leaves the rent unpaid.
Why B is wrong: Insurers limit personal disability benefits by reference to the client's own earned income, so the practice's fixed costs will not support the extra coverage, and this approach also converts a business expense into a personal one.
Why C is correct: Business overhead expense insurance exists for exactly this exposure. It is a reimbursement contract for the practice's continuing fixed costs, with a short benefit period because the purpose is to keep the doors open until the owner returns or winds the practice down.
Why D is wrong: Business interruption cover responds to a covered physical loss to the premises or property, such as fire or storm damage. The owner's illness is not a property peril, so the endorsement would not respond at all.