How can you protect your business?
It’s well known that most self-employed people view their business as their retirement fund, but what happens if they become sick or injured? Their Income Protection benefits are designed to protect their personal situation; cover bills, groceries, mortgage and living expenses. If they were to use this money for not only these expenses, but their business expenses as well, the whole foundation of the protection they have could collapse.
Consider this…
Steve is a plumber and has been in business for himself for the last three years. He employs a full time plumber and an admin / office manager. Steve generates the business income, and has a work Ute and equipment financed through the business.
Steve has been feeling run down and after a visit to his GP and blood test, is diagnosed with glandular fever. It is unlikely that Steve will be able to work at full capacity for up to six months.
While his staff can do some of his work, Steve has to cancel a number of jobs because he can’t commit to a firm date as to when he will be back on his feet. As a result several clients take their business elsewhere. Steve is struggling to work out how he will pay the bills. It’s not just expenses like vehicle repayments and utilities but he has a responsibility to his staff and this plays heavily on his mind.
Business Expense Cover would provide Steve with an ongoing monthly benefit to help cover the day to day fixed expenses whilst he was not able to work due to his sickness. Not only this, but it would also ensure his Income Protection benefits were being used for what they were meant to do originally; cover him personally whilst being unable to work.
Business Expense Cover has been specifically designed for short term periods of disablement as per the above scenario. If the nature of the disability is more serious, then 12 times the monthly benefit may help keep the business afloat in the interim which may include preparing the business for sale should the owner have a serious sickness or injury.
So What Does Business Expense (BEX) Insurance Cover?
Fixed operating expenses covered include, but are not limited to:
- Rent of business premises
- Principal and interest repayments on business loans
- Utilities,
- Leasing costs for equipment and motor vehicles
- Accounting fees & professional fees
- Cost of a locum and the salaries and remuneration of employees who aren’t directly involved in generating sales
BEX is ideally suited for businesses with up to five staff
What Does BEX Insurance Not Cover?
BEX insurance policies do NOT cover the salaries of employees involved in generating sales, employees brought in to replace the disabled insured Person (except for a locum for certain occupations), partners that do the same work as the disabled person that can continue to generate the business income that will allow for business expenses to be met. If the business is able to generate income and meet its expense obligations then BEX is usually not a viable option.
Things to Consider:
A BEX insurance policy pays a claim once the business owner has suffered an injury or sickness that leaves them disabled and unable to work. Overhead expenses that are incurred during the business owner’s time of disability are eligible for reimbursement. Before business owners are to receive benefit payments from their BEX insurance policies, they must satisfy a waiting period that is typically 30 to 60 days (can be shorter or longer) with a maximum benefit period of 12 months.
Also, BEX plans do not pay out a flat rate for covered expenses, as the costs can fluctuate month to month. This is why monthly ongoing financials are required, to determine what is the shortfall in being able to meet said expenses. This would be payable on a monthly basis up to the policy’s monthly coverage limit. If the monthly insured benefit limit is not paid, then the policy may extend beyond 12 month benefit period.
Whilst a BEX policy may be relevant to a today, this may not necessarily be the case down the track. This is why we conduct an annual review with you as circumstances can change; for example what if the business grows and employs more people? Could these employees continue to work in the business, and in turn result with minimal impact to revenues / profit in the event of the principal becoming disabled? This of course would mean the business is able to meet its expenses, and therefore BEX would not be of benefit or able to claim on.
If you are a small business owner and think that protecting your livelihood is a good idea, please contact me
No obligation; No fees; just honest, quality service to help you obtain the cover you need at the best possible rate. Please call for more information
