What is Business Expenses Insurance?
Business Expenses Insurance provides a monthly benefit to pay fixed ongoing business expenses should the business owner be unable to work due to sickness or injury. This cover could protect up to 100% of your fixed business overheads on a monthly basis for up to 1 year.
Building a profitable small business, such as a dental or medical practice, requires many hours of hard work but it’s very rewarding. If you own and manage a business, you’ll agree that your business is your baby. It’s also most likely your livelihood and your family’s largest asset.
Safeguarding and protecting this important, valuable asset is critical because it’s impossible to predict if, and when, something unforeseen will happen to you. If you were unexpectedly struck down by an illness or injury, chances are your business would suffer. This risk is too serious to dismiss.
Fortunately, the impact of a sudden, prolonged illness or injury on your business can be minimised and prudently managed by taking out business expense insurance cover, which may be more affordable than you may think. There really is no reason to leave yourself, your staff, clients and loved ones unnecessary exposed.
It is designed for small business owners who may become disabled due to illness or injury and covers fixed business expenses that continue even if the owner is unable to work. The insurance can provide a monthly benefit to help keep the business running during the owner’s disability. The cover is not available inside superannuation and usually requires the insured to be self-employed or a small business owner (≤5 staff including owners) and working ≥20 hours/week in your principal occupation.
This product’s premiums can be tax deductible.
Contact us to get a quote and policy comparison here.
Who should consider Business Expenses Insurance?
Self-employed individuals, that have a responsibility to cover the fixed costs of a business such as rent, amenities and wages.
What are some examples of expenses covered by Business Expenses Insurance?
Subject to the insurer policy wording, these could include :
- Rent
- Utilities
- Salaries of non-income-producing employees
- Leasing costs
- Insurance premiums
- Advertising
- Accounting fees
- Property taxes
- Loan interest
- Subscriptions to professional bodies
What are some examples of expenses NOT covered by Business Expenses Insurance?
Subject to the insurer policy wording, these could include :
- Personal Expenses
- Home mortgage
- Household utilities
- School fees
- Personal insurance
- Food
- Clothing
- Entertainment
- Transport
- Internet
- Home maintenance
- Savings
How does Income Protection Insurance differ from Business Expenses Insurance?
- Business Expenses Insurance covers business costs.
- Income Protection Insurance covers personal living expenses.
- Without business expenses insurance, income protection may be overburdened.
Worked Example
Pre-disability
- Business income normally $450,000 and used to pay Business Expenses of $150,000 and Take-home income of $300,000
- Household costs of $140,000 and net savings of $160,000 before disability
Post Disability With Business Expenses Insurance and Income Protection Insurance :
- Business income falls to nil and Business Expenses of $150,000 do not go away.
- Business Expenses Insurance funds the $150,000
- Income Protection Insurance replaces $210,000 of the $300,000 take home pay.
- Household costs are $140,000 and net savings are $70,000 post disability
Post Disability Without Business Expenses Insurance but including Income Protection Insurance :
- Business income falls to nil and Business Expenses of $150,000 do not go away.
- Income Protection Insurance replaces $210,000 of the $300,000 take home pay.
- $150,000 needs to be paid from the $210,000 Income Protection Insurance leaving $60,000
- Household costs are $140,000 and unable to be met by the remaining $60,000
- Personal savings must be drawn on to pay the shortfall
Business Expenses Disability Insurance may be referred to by several alternative names, including
- Business Overhead Expense Insurance (BOE)
- Disability Overhead Expense Insurance
- Overhead Insurance
- Business Expense Insurance (BEX)
- Business Overhead Expense Disability Income Insurance
Common Exclusions
Subject to the insurer policy wording, these could include if your disability, sickness, injury, or death is caused directly or indirectly by:
- Intentional self-inflicted acts, suicide, or attempted suicide.
- War or acts of war, whether declared or not.
- Criminal activity: committing or attempting to commit a criminal offence.
- Normal or uncomplicated pregnancy or childbirth.
- Elective surgery or treatment voluntarily undertaken within the first 6 months of:
- Cover commencement
- Increase in insured monthly benefit amount (excludes indexation increases)
- Last reinstatement date
- Anything specifically excluded on your policy certificate.
Situations Where No Benefit Is Payable could include :
- While you are in jail, a correctional centre, or a remand centre.
- If your professional licence or membership is cancelled, suspended, restricted, or deregistered due to misconduct.
- If a court order restricts or prevents you from performing your regular occupation.
- If the benefit is not permitted by law, or relates to expenses regulated by:
- National Health Act 1953 (Cth)
- Private Health Insurance Act 2007 (Cth)
Want more information or answers to frequently asked questions ?
- Business Expenses Disability Insurance can ensure the business can continue running during the owner’s recovery, with benefits up to $40,000 per month for one year, and premiums that may be tax deductible, making it a practical safeguard for business continuity. Read an article with more information on Business expense insurance (income protection insurance for your fixed business expenses) here
- If you would like to read a presentation, with illustrations, then you can access another article here : Explaining business expenses insurance
The information provided contains general information and examples and does not take into account your personal objectives, financial situation or needs. It is important, before deciding whether to act on any of the topics. that you consult a licensed or authorised financial adviser if you require financial advice that takes into account your personal circumstances. You should also review the Product Disclosure Statement (PDS) issued by each insurer before considering further. Note that the policy wording will differ from insurer to insure and loadings, exclusions and other limitations may apply by the insurer to each applicant on a case by case basis.
