Business revenue insurance protects your business by covering operating costs and replacement expenses if a key person can no longer work.
Premiums vary based on business finance, potential client fallout and the cost of finding a suitable replacement.
It covers lost revenue and recruitment fees, but excludes undocumented income and non-essential employee losses.
How much does business revenue insurance cost?
We can't give you an exact cost because every business is different. Business revenue insurance costs are based on how much it would cost to offset replacing a key person who is no longer able to fulfill their duties due to critical illness, death or disablement. As a result, insurers take these factors into consideration when calculating your premiums.
Finance. Are there any borrowings or financing that needs to be repaid?
Payout. Are there any loans or other payments that are owed to the key person or their estate by your business?
Client Fallout. Are there any client relationships that would suffer irrevocable damage should a key person no longer be handling their account?
Handover. How long would it take to find a suitable replacement and train them up in your company's processes and what would this process cost?
Fallout. What would the immediate costs of losing this key person be to the business? How would this disruption affect your company's profits?
What is business revenue insurance?
Business revenue insurance, as the name suggests, is designed to protect your business' revenue. It provides the funds you need to return the business to the financial position that it was in before a key person was forced to leave or passed away. You can spend those funds on hiring and training a replacement, paying ongoing overheads, rebuilding client relationships, protecting your profit or looking after your revenue in some other way, it is entirely up to you.
The purpose of business revenue insurance is to offer much-needed financial protection for your business. The simple fact is that the loss of a key person could create significant issues for your business that could in turn lead to a loss in revenue. You could lose clients or your business may lack the strategic direction and expertise that your previous employee offered.
What does business revenue insurance cover?
Business revenue insurance claims are decided on a case by case basis and rules vary between insurers. Here's a general overview:
Covered
Loss of revenue
Ongoing operating expenses
Finding and training a replacement
Recruitment fees
Not Covered
Any undocumented income
Non-essential employees or workers
Voluntary closures
Losses due to strikes
What other types of insurance should you consider?
Here are a few other important types of business insurance you should consider taking out:
Commercial property. This looks after our property or its contents if they're damaged.
Professional indemnity. This covers legal costs if your business provides inaccurate advice or poor service to a customer who sues you.
Product liability. This covers legal costs if a product you sell harms someone and they sue you.
Public liability. This covers legal costs and compensation if you cause injuries to someone or damage their property.
Business interruption. This covers lost income if your business is unable to operate. For example, if a storm damages your store and you can't open to customers.
Talk to a broker about business revenue insurance
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If you are ready to speak with a consultant about different business insurance options available, simply enter your details in the form. Keep reading if you want to learn more about the different types of cover available.
Business revenue insurance specifically protects your business' revenue when a key person is unable to work or passes away. It provides funds to manage the financial impact of losing that individual. Business interruption insurance on the other hand covers lost income and ongoing fixed costs when your business cannot operate due to property damage natural disasters or other physical disruptions to your premises or equipment.
Business revenue insurance focuses on covering the financial impact of losing a key person by replacing lost revenue and covering operational expenses recruitment costs and training fees to restore your business to its prior financial position. Key person insurance typically provides a lump sum payment to the business upon the death or critical illness of a vital individual. This lump sum is often used for broader strategic purposes like repaying business debts buying out shares or funding succession plans rather than directly replacing lost day to day revenue.
A key person is an individual whose absence due to death or disablement would severely impact your business' ability to generate revenue and operate effectively. This could be a business owner a senior executive a top salesperson an employee with unique skills or expertise or anyone whose specific contribution is critical to the company's profitability client relationships or strategic direction. The insurer will assess the individual's role and their direct financial impact on the business.
Generally premiums paid for business revenue insurance are not tax deductible for Australian businesses. The payout from these types of policies is typically considered assessable income for tax purposes. However, tax laws can be complex and specific circumstances may vary so it is always advisable to consult with a qualified tax advisor or accountant regarding your individual situation.
The payout amount for a business revenue insurance claim is determined by the specific terms of your policy and the proven financial loss your business experiences due to the key person's absence. Insurers will typically assess the actual loss of gross profit or revenue ongoing operating expenses incurred recruitment costs and training expenses for a replacement. The payout will be subject to the policy's sum insured and any applicable waiting periods or benefit periods.
Absolutely. Business revenue insurance can be particularly vital for sole traders or very small businesses where the owner or a single key employee often represents the entirety of the business's operational capacity and revenue generation. The unexpected loss of such an individual can lead to immediate and severe financial distress making it difficult to cover ongoing expenses retain clients or find a suitable replacement. This insurance can provide essential financial support during this critical period.
Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards.
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