Business expenses insurance pays a monthly benefit – generally for a maximum of one year – to cover fixed business costs if the business owner suffers an illness or injury and is unable to work.
This means that the business’ bills can continue to be paid – and the business can stay afloat – without the owner having to dip into their savings or increase their debt while they are recovering.
It can be particularly useful for smaller businesses with high fixed costs that are dependent on the income generated by the owner.
What expenses can this insurance cover?
This insurance covers your fixed business costs, as a monthly reimbursement, so you can focus on your recovery – and not your bills. Insurers typically cover expenses such as:
- Accounting and audit fees
- Regular advertising costs, postage, printing and stationary
- Electricity, gas, heating, water, telephone, internet and cleaning costs
- Security costs
- Rent, property rates and taxes
- Membership fees, publications and subscriptions to professional bodies
- Leasing costs of plant and equipment
- Bank charges, principal and interest payments on business loans
- Business related insurance premiums – public liability, professional indemnity
- Salaries and other related costs for non-income generating employees
- Net costs associated with employing a locum
What expenses cannot be insured?
There are some costs in the business that cannot be insured and typically these are:
- Remuneration for the business owner
- Remuneration for income producing employees.
- Depreciation on real estate
- Losses on investments
- Repayments of principal of any personal loan or other finance agreement
- Costs of a capital nature including books, fixtures and fittings, furniture, merchandise or stock
Business expenses premiums are usually tax deductible.
However, the monthly payments from the insurer to your business are taxable.
You can tailor the insurance waiting period to suit your business
This insurance generally has a flexible waiting period – that is, the length of time before the insurer will start paying you benefits.
For example, you can generally choose a waiting period between 14 and 90 days. The longer the waiting period, the lower the premium.
The benefit period – that is, the length of time the insurer will pay you benefits – is typically a period of 12 months. Payments are made in arrears. Business expense insurance premiums are waived whilst on claim.
A business expenses policy can be taken out as part of your income protection policy or can be a separate cover.
Call Invest4Life on (07) 5456 1355 to discuss your business risk insurance needs with our Financial Advisers.
Disclaimer: This information has been produced by Australian Unity Personal Financial Services Ltd (‘AUPFS’) ABN 26 098 725 145, of 114 Albert Road, South Melbourne, VIC 3205, AFSL & Australian Credit Licence 234459. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, tax, or personal advice and should not be relied on as such. You should obtain financial advice relevant to your circumstances before making investment decisions. AUPFS is a registered tax (financial) adviser and any reference to tax advice contained in this document is incidental to the general financial advice it may contain. You should seek specialist advice from a tax professional to confirm the impact of this advice on your overall tax position. Nothing in this document represents an offer or solicitation in relation to securities or investments in any jurisdiction. Where a particular financial product is mentioned, you should consider the Product Disclosure Statement before making any decisions in relation to the product and we make no guarantees regarding future performance or in relation to any particular outcome. Whilst every care has been taken in the preparation of this information, it may not remain current after the date of publication and AUPFS and its related bodies corporate make no representation as to its accuracy or completeness. Published: February 2017 © Copyright 2017