Business expense policy

 

Business expense insurance allows you to insure up to 100% of allowable business expenses which your business would incur if you are suddenly unable to work. Commonly, this will be taken out by self-employed or small business operators so as to ensure that they have a business to return to.

 

Commonly, this will be taken our by self-employed or small business operators so as to ensure that they have a business to return to, or can continue so as to be sold if they are off work for an extended period.

 

Level of cover
Benefit period
  • This is the maximum length of time that you can receive payments while you are not working. 
     

  • You can select a benefit period for up to two years.
     

  • The longer the benefit period, the higher the premium.
     

Waiting period
  • This is the length of time between stopping work and when you can make a claim to start receiving payments. 
     

  • You can select a waiting period of between 30 days and two years.
     

  • The shorter the waiting period, the higher the premium.
     

Occupation rating
  • The cost and availability of cover is directly related to your specific occupation.  Consider-ation will be given to any risks associated with your job and how much you work, whether you are part-time or casual. 
     

  • Income protection is not available to people who are unemployed and may be paused if you go on some forms of extended leave, such as unpaid leave and maternity leave.
     

  • Your financial adviser can help you find an appropriate policy to cover your line of work.
     

Tax treatment

Business expenses premiums are generally tax deductible, but the payments received are considered income and are subject to tax.
 

  • Generally, 100% of allowable business expenses.
     

How much business expenses cover should I have?
 

It is important to choose the right level of cover for you and your business’s needs. 

 

You should think about:

 

  • Your financial commitments, what are they and how long will they last.

  • Whether your ongoing loan repayments to cover.

  • If you need the maximum level of cover, or if you have other financial resources to help cover expenses.
     

Business expenses are generally of an indemnity contract.

 

Indemnity contract
  • When you claim, you must prove to the 
    insurance company how much your business expenses are. 
     

  • Your busniess expenses at claim time will determine how much you are paid. 
     

  • If your expenses reduce in the future, you can only claim on the lower amount.  If your income increases in the future, the maximum you can be paid is the sum insured. 
     

What waiting period should I have?

 

To work out an appropriate waiting period, you will need to consider:
 

  • How much leave you have available (e.g. sick leave, long service leave);

  • Whether you have savings that can be used to fund your expenses during the waiting period.
     

You need to weigh up how long you can go without income, against the cost of the premium - the shorter the waiting period, the more expensive the insurance.

 

What benefit period should I have?

 

To work out an appropriate benefit period, you will need to consider:

 

  • Your financial commitments, what are they and how long will they last.

  • Whether you have ongoing loan repayments to cover and how long they will last.

  • What age you intend to retire.

  • Whether your spouse continue to work.

  • Other savings, such as superannuation, you have available to fund your future expenses.
     

We can help you determine appropriate income protection cover to meet your current situation and your ongoing needs.
 

© 2016 Prospaerum Pty Ltd

Prospaerum Pty Ltd, trading as Prospaerum Financial Planning

Corporate Authorised Representative of Charter Financial Planning Limited

 

Australian Financial Services Licensee
Licence Number 234665

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