Life License Qualification Program (LLQP) Practice Exam

What is the primary purpose of a Business Overhead Expense Disability Plan?

1. Cover group disability insurance costs

2. Cover fixed business expenses

3. Replace the owner's income

4. All business-related expenses

The correct answer is: Cover fixed business expenses

The primary purpose of a Business Overhead Expense Disability Plan is to cover fixed business expenses. This type of insurance is specifically designed for business owners to ensure that, in the event of a disability, the essential operational costs of the business continue to be met. Such expenses can include rent, utilities, salaries of employees (not including the owner's salary), and other necessary costs that keep the business running during periods when the owner is unable to work due to a medical condition. Choosing this option reflects a clear understanding of the specific functions and limitations of a Business Overhead Expense Disability Plan. While it is important to note that this plan does not replace the owner's income or cover all business-related expenses, its targeted purpose is to provide financial support for ongoing fixed costs. Therefore, opting for this answer demonstrates a nuanced grasp of how these types of insurance policies are structured to meet the needs of business operations during challenging times.