Business Expense Insurance

If you run your own business and cannot work due to illness or injury, who pays the bills?

What is Business Expense Insurance?

Business Expenses insurance is designed specifically for business owners or sole traders and aims to minimise the financial impact of their sickness or injury by paying a monthly benefit to cover eligible business expenses during a prolonged absence from work. This will allow a business owner to focus on recovery.

To be eligible you need to be a sole trader, in a partnership or a working director and be responsible for paying the business’s expenses. Eligible expenses may include costs for premises, services/utilities, equipment and leasing costs, salaries and associated costs for non–income generating employees, and accounting fees.

The policy is owned by the business entity with the business owner as the insured person. Generally premiums for Business Expenses insurance are fully tax deductible. The proceeds are taxable, but the business can claim tax deductions for expenses paid

How does it work?

Business expense insurance can be used to cover some expenses to keep your business going.

Expense

Generally Covered?

Rent

P

Staff salaries

P

Equipment maintenance costs

P

Bills, including electricity, gas, cleaning, telephone and internet, etc.

P

Loan repayments

P

Insurance premiums and security expenses

P

The cost of a locum

P

Leases on cars, machinery, and other equipment

P

Accounting fees

P

Auditing fees

P

Membership fees and subscriptions to professional bodies

P

Advertising, postage, printing and stationery

P

The salaries and wages of temporary employees

O

Income taxes

O

Furniture costs

O

Inventory costs

O

Estimated profits

O

What are the benefits?

  • Business Expenses policies will usually pay a benefit up to 100% of your gross (eligible) expenses for a set term of up to 12 months after a waiting period has expired.
  • Like Income Protection, Business Expenses Insurance pays a monthly benefit to cover your fixed business overhead expenses if you're injured or ill and cannot work.
  • Holding your cover through your business means insurance premiums are tax deductible to the business.

What should I be thinking about?

  • Most insurers will need you to provide evidence of your fixed expenses when you apply for this insurance. This may include copies of bills and financial statements.
  • The benefit amount for this cover needs to be an accurate estimate of regular, fixed expenses. If this estimate is incorrect, you may be underinsured.
  • Payment at claim is normally limited for business expenses to12 months, as opposed to an income protection policy where you can receive ongoing benefits up to age 70.
  • Benefits paid may be subject to tax and only the net amount will be available for paying your business expenses.
  • The insurer may offer revised terms including higher premiums or health exclusions, depending on the outcome of their assessment.
  • When applying for any insurance, you need to complete your application for insurance honestly and with full disclosure. Failure to do so may give the insurer cause to void your policy and not pay claims in the future.

Important information regarding this information


This information is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA.

Care has been taken to provide up to date and accurate information relating to the subject area however BR Advice Pty Ltd (ABN 30 612 056 523, AFSL 488655), Blue Rock Private Wealth Pty Ltd (ABN 95 166 927 055, AFSL 452733), Blue Rock Private Wealth (Melb) Pty Ltd (ABN 48 652 202 698, ASIC AFS No. 1298365) and their representatives make no representation as to its accuracy or completeness.

Published: September 2022.

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