If you’re a business owner, have you ever thought about the very real possibility of what would happen if you couldn’t be in attendance day to day, running your business? How long might your business be able to survive for? If you have business partners and a dedicated body of experienced staff, possibly you could take days, weeks, maybe months off without any ramifications. But this is not every business owner’s situation. You might be the absolute key ingredient in your business and without you, it just doesn’t function?
The stark reality is that if you were struck down with injury or illness, couldn’t work and keep generating cash flow, most of your business’s expenses would still need to be serviced. These are not limited to, but would most likely include:
- Staff salaries.
- Rent.
- Bills (including gas, electricity, cleaning, phone, internet and more.)
- Business loan repayments.
- Insurance premiums.
- Security costs.
- Equipment maintenance.
- Leases on vehicles, machinery, and equipment.
- Accounting fees.
- Auditing fees.
- Marketing, postage, printing, and stationary.
As you can see, once you start to itemise and add them up, day-to-day business expenses can be substantial.
Just as an income protection policy does an individual, a business expenses policy provides a regular source of income enabling a business to meet its overheads. Generally paid monthly to cover fixed business overheads it typically extends over a 12-month period.
What business insurance doesn’t cover is the cost of temporary employees like seasonal workers. It also won’t cover income taxes, or costs associated with buying new stock.
Of course, in weighing up whether your business needs business expenses insurance the questions you’re trying to answer are:
- Whether your business relies on just you, or a small number of other vital people to function?
- Does your business rely on generating consistent daily cash flow to cover its operating costs?
- Does your business rely on contractors providing services to it to keep generating cash flow?
- And ultimately, what are the businesses savings? Could it keep paying out overheads for an extended time without revenue coming in?
One thing to be aware of is that business expenses insurance is not the same as business interruption insurance, which covers your business if it is unable to operate due to an extraordinary event like a fire, or flood. Or indeed being shut down under government mandate by a pandemic such as Co-vid19.
Business expenses insurance covers you, if you are not able to continue to operate your business due to illness or injury. So, consider carefully taking out cover if you are:
- A small business.
- A partnership with 5 or less partners.
- A sole trader.
- A business that relies on services provided to generate cashflow, such as consultants, contractors and professionals.
Your business might have been moving along fine, only to be threatened by yourself becoming sick or injured. If you don’t have the resources behind you to keep paying the business costs it can be stressful and you could ultimately lose the business—and all the hard work you’ve put into building it. However, if you could have expenses of, for example up to $60,000 a month covered for 12 months, you might avoid all of the above disasters and your policy may well cover 100% of your business costs.
Additionally, the cost of premiums for this type of policy are tax deductible, and can also be waived when you are on a claim. Plus, your cover generally automatically increases in line with the consumer price index.
Premium options
You need to check the individual guidelines of any policy you are considering taking out, but you may find you can choose to pay your premiums as:
- Stepped Premiums – as you get older, your insurance premium will vary each year, your benefits remain the same.
Or
- Level Premiums– your insurance premium does not go up by age-related increases, your benefits remain the same.
As you can see there’s a fair bit to take into consideration if you’ve been thinking about business expenses insurance. If you would like to investigate your options further, you can talk to one of our consultants at SMFS Insurance Partners. Just call us on (07) 3064 0413 or utilise the handy contact us section on our website.
