Running your own business takes time, energy and money. Rent, staff wages, utilities, advertising and loan repayments don’t stop just because you do. But what happens if illness or injury forces you to step away from work for a few months?
That’s where Business Expenses Insurance can make all the difference. It is designed to reimburse the fixed costs of running your business while you are temporarily disabled, helping to keep the doors open until you’re back on your feet.
Why it matters
Many small business owners have Income Protection to replace part of their personal income, but forget about the business itself. Without cover for ongoing overheads, even a short period away can put years of hard work at risk.
Eligible expenses usually include:
- Rent, rates and insurance on premises
- Utilities such as power, internet and phones
- Equipment leases, loan repayments and vehicle costs
- Salaries of non-income generating staff (like admin support)
- Regular contracted services such as cleaning or advertising
- Accounting and audit fees
- Professional association or membership fees
- Business insurance premiums
- Net costs of hiring a locum (after their own income is considered)
A simple example
Meet Michael, a self-employed electrician earning around $95,000 per year. He holds Income Protection that pays 70% of his income if he can’t work.
On claim, he would receive about $5,540 per month. That looks manageable – until you consider the business expenses he still needs to cover:
- Vehicle lease: $880 per month
- Advertising commitments: $420 per month
- Storage rental: $390 per month
- Business insurances: $620 per month
That’s $2,310 in fixed costs each month. After paying these, Michael’s effective income is closer to 46% of what he was earning – far less than he and his family are used to living on. And this is just some of the costs that may continue and could be insurable. With Business Expenses Insurance, those overheads would be reimbursed, leaving his Income Protection benefit available for personal living costs.
Often overlooked, but vital
Despite its importance, Business Expenses Insurance is one of the least-taken-up forms of protection. It’s inexpensive compared with other covers, but often ignored simply because people aren’t aware of it.
It’s also important to note that the actual approach to what expenses can be covered – and how cover applies for different business structures and occupations – can vary between insurers. Having support from an adviser is a wise step to help you understand the detail and put the right cover in place for your situation.
If you run your own business, it’s worth asking: could my business survive a few months without me? If the answer makes you pause, Business Expenses Insurance might be the missing piece in your protection plan.
