What is business expenses insurance?
Business expenses insurance is gaining popularity among business owners these days. This is because it gives entrepreneurs solutions to help support their financial ability to maintain their business operations in case of an illness, tragic event or misfortune happening to them.
How it works
If you find yourself unable to work for an extended period of time because of illness or injury, this insurance can help cover the expenses your business requires in order to keep running.
Can I get cover straight away?
Plans vary, but you generally need to be unable to work for at least 14 days before you can claim benefits.
What's covered by business expenses insurance cover?
Business expenses insurance is distinct from the insurance you take out on the physical assets of your business such as equipment, inventory or premises. For example, AIA’s business expenses plan covers:
- Accounting and audit fees
- Regular advertising costs, postage, printing and stationery
- Electricity, gas, heating, water, telephone 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 and interest on business loans
- Business-related insurance premiums
- Salaries and other related costs (e.g. payroll tax, super contributions) for non-income generating employees of your business
- Net costs associated with employing a locum (replacement worker to cover your duties)
What does business expenses insurance provide?
Business expenses insurance generally provide the following (taken from Asteron Life Insurance PDS):
- Monthly benefit. For a business owner, business expenses insurance will cover monthly expenses of running your business, up to a maximum monthly total benefit determined at policy commencement.
- Death or disablement payment. If you become terminally ill or permanently disabled in the course of work, the insurer will cover you for a predetermined benefit period.
- Variable waiting period. Most policies require a minimum of 14 days unable to work before you can claim benefits, but you can nominate a longer waiting period up to 90 days to lower your premiums.
- Premium waiver. Premiums will be halted during benefit payment, and any premiums paid during the waiting period will be withheld or refunded.
- Benefit indexation. Payments will automatically increase each anniversary period by an amount related to the Consumer Price Index (CPI).
- Cosmetic and elective surgery. Business expenses insurance will cover disabilities arising from cosmetic surgery, elective surgery or surgery involving organ transplant.
How does it compare to income protection insurance?
Business expenses insurance and income protection insurance cover different things.
If you become disabled or otherwise unable to work, income protection insurance will usually cover 75% of your monthly income for the claim period, up to $10,000 a month. This can cover costs like rent, credit card repayments, childcare costs or basic needs. This type of insurance covers you personally as a worker.
If you become disabled or otherwise unable to run your business, business expenses insurance provides the benefits listed above. This type of insurance covers you as a business owner.
Becoming disabled while having both income protection and business expenses insurance could result in benefits that cover both your business and your personal expenses.
An example of how cover works
An architect for 12 years, Rebecca dislocated her shoulder while helping a friend move heavy furniture to a new apartment. Despite suffering no permanent harm, she was forced to take time off from her practice to allow her shoulder to heal and for the pain to go away.
Fortunately, Rebecca had invested in a Business Protection Expenses Insurance policy from AIA. Her insured monthly benefit equated to about $22,000 a month, which meant she could hire another architect to manage her architecture firm and pay for its rent and expenses.
After three months recuperating at home without any concerns for her practice, Rebecca was able to return to work.