It’s disability coverage that the business owns and is paid, to protect the business if an owner or key person can’t work because of illness or injury. There are three main types:
- business overhead expense insurance, which pays the business’s fixed monthly costs;
- key person disability insurance, which pays the business while a key person is away;
- buy-sell disability insurance, which funds the purchase of a disabled owner’s shares.
It doesn’t replace an owner’s own income: for that, the owner needs a personal disability policy. Some businesses also add critical illness coverage, which pays a lump sum after a covered serious illness.