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Understanding Business Expenses Insurance
When you’ve worked hard to build up your small business, you want to make sure it’s as protected as possible. Unlike grand corporations, a small business relies on your – the owner’s – contribution to keep the business ticking over. What would happen if you were so ill or injured you could no longer work? In this case, Business Expenses Insurance, also known as Business Overhead Expenses Insurance, safeguards your business against ruin.
Business Expenses Insurance defined
In a nutshell, Business Expenses Insurance acts like a sort of Income Protection policy – but for your business. Like Income Protection, Business Expenses Insurance pays a monthly benefit to cover your fixed business overhead expenses if you’re injured or ill and cannot work. The benefit generally lasts a maximum period of 12 months.
What it covers
Business Expenses Insurance covers a whole range of expenses your business must pay out regularly. It does not cover estimated profits. It covers the costs your business spends on a daily basis and can include:
- Rent
- Staff salaries
- Equipment maintenance costs
- Bills, including electricity, gas, cleaning, telephone and internet, etc.
- Loan repayments
- Insurance premiums and security expenses
- The cost of a locum
- Leases on cars, machinery, and other equipment
- Accounting fees
- Auditing fees
- Membership fees and subscriptions to professional bodies
- Advertising, postage, printing and stationery
Business Expenses Insurance doesn’t typically cover:
- The salaries and wages of temporary employees
- Income taxes
- Furniture costs
- Inventory costs
Do I need it?
It’s common for small businesses to experience a drop in profits when the business owner or manager isn’t around to keep up the momentum. But the world doesn’t stop when you’re out of action; while your revenue decreases, your business must still cover overhead expenses. Your Business Expenses Insurance policy safeguards your business against your absence at work.
While Business Expenses Insurance isn’t mandatory (check out Business.gov.au for compulsory policies for small businesses), it is worth considering if you are:
- A small business
- A sole trader
- A partnership with five or less partners
- A business that relies on services provided to generate cash flow (such as professionals or consultants)
It’s up to you to decide whether you want Business Expenses Insurance. But the guarantee of having enough financial resources to sustain your business in times of need is a powerful thing.
It’s worth remembering Business Expenses Insurance is a business expense, which means the premiums are tax-deductible. Of course, since benefit payments are considered income, they can be subject to tax.
The cost of Business Expenses Insurance
As with all forms of Life Insurance, premiums for Business Expenses Insurance vary depending on a variety of factors including, but not limited to:
- The insured’s age at the time of policy purchase
- Health status
- Type of work
- The length of the benefit period
- Additional persons covered
Is it the same as Business Interruption Insurance?
The short answer: No.
Business Interruption Insurance covers your business if it is unable to operate because of a major event (such as flooding or fire). On the other hand Business Expenses Insurance covers your business if YOU are unable to work because of illness or injury.
What are the benefits?
There are plenty of benefits to Business Expenses Insurance, including the fact that premiums are tax-deductible, that up to 100% of your expenses can be covered, that premiums can be waived when you’re on a claim, and that your cover automatically increases with the consumer price index.
Most importantly, the biggest benefit of Business Expenses Insurance is the promise that your business costs are covered in times of need.
Learn more about the benefits of Business Expenses Insurance with this comprehensive article.
Considering Business Expenses Insurance?
If you’re contemplating investing in Business Expenses Insurance – or you simply want to know more, contact one of our professional insurance advisers for more information. Or if you’re confident and ready to commit, submit a Quote Request today.