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How to protect your business if your sick or injured

Posted by Naomi Rosenthal on Thursday, June 21, 2012 Under: Life Insurance

The key areas you can consider to protect your business in the event you suffer an illness, injury or pass away include:
• Key Person Cover
• Buy/Sell Cover
• Business Debt Cover
• Business Expense Cover
This article explores the importance of Business Expense insurance for the self-employed or those in a small partnership.

Business Expense insurance should be a key component of every business risk strategy – regardless of whether you are a solo tradesperson, a dentist running your own practice, a solo- or mum-preneur with a new growing business that is reliant on you to generate the income.
While there are over 2 million Australians who own and operate one or more businesses , only 18,300 are covered by Business Expense insurance .
In the event you’re unable to work, Income Protection replaces up to 75% of your pre-disability income. This money helps to cover your everyday costs and household bills – but how will business expenses like rent, salaries and overheads be paid? While your revenue has been reduced because of your inability to work, your fixed business expenses still need to be paid. This can result in either:
1. You are forced to cover your business expenses using financial resources not intended for this purpose (eg Income Protection benefits, mortgage on the home)
2. Debts will simply rise and the business will be at risk.
Business Expense insurance therefore helps your business survive by covering the business costs while you are unable to work due to illness or injury.

Case Study.
Joan is a successful doctor and recently went into practice for herself. She earns a net income of $10,000 per month and has Income Protection of $7,500 per month (75% of income). She does not have Business Expense insurance.
On a recent skiing holiday, Joan broke her back and while prognosis is very good that she will walk again, she is currently unable to work for at least 6 months. Although Joan has stopped earning an income, the following monthly expenses continue to accrue:

Monthly Expense

Expense Amount







Lease of work car




Net locum cost


With no source of funds to pay a locum and no money coming into the business, Joan may have had to lay off her two part-time receptionists, and close the surgery until she was able to return to work. To minimise the risk of regular patients ‘defecting’ to the new medical clinic a few streets away, Joan would probably have had to return to work early, before she’d completely recovered.
Joan’s income has now dropped to $7,500 per month and she must continue paying her business expenses. Once these costs are subtracted, she’s left with just $2,950.
That’s just 29.5% of her pre-disability income to cover her personal expenses including the mortgage, children’s school fees and general day to day costs.

Business Expense insurance can be easily tailored to fit within your budget, it is relatively inexpensive and the premium is tax deductible.

If you’re running a business and have fixed costs, you need Business Expense insurance.
Talk to us today on 02 9417 6011.

In : Life Insurance 

Tags: "business expense cover" "business insurance" sickness injury business survival 

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