Small Business Insurance Guide

small-business

As a small business owner, it is important to know what steps you can take to help protect you, your business and your family should you be unable to work due to a sickness or accident.

Being away from your business for a significant period of time can be extremely detrimental and could even lead to you being forced to close your business, leaving you without an income and your employees without jobs.

We have put together this small business insurance guide to show you some of the insurance options you have when it comes to protecting you and your small business, including:

Income Protection

An Income Protection policy can help cover up to 75% of your salary should you be unable to work due to sickness or an accident. Paid as a monthly benefit, it can help to cover:

  • Day to day living expenses; or
  • Mortgage or rental payments; or
  • Any immediate debts you have; or
  • Any other way you see fit.

If you are a small business owner and your business relies on you to generate income and you are unable to work due to a sickness or accident resulting in your business being unable to generate income as a result, you may find that you do not have your own personal income available anymore. You may also find that as a small business owner or as someone who is self employed, you do not have sick leave available.

If you are the sole income earner or majority income earner in your family, not being able to earn an income can have a devastating affect on your family, possibly forcing you to go back to work before you have fully recovered.

An income protection policy can give you the peace of mind knowing you can recover properly and not worry about not earning an income. Furthermore, your policy can be customised with a range of policy options to suit your needs.

When you are comparing quotes, make sure to discuss with your financial adviser your options for:

Tax Implications

Income Protection premiums are generally tax deductible, as the Australian Tax Office views them as being income protecting in nature. However it is important to note that while your premiums are tax deductible, any monthly benefit you receive while on a claim is tax assessable.

Business Expenses Insurance

While an income protection policy may help you through a difficult period by providing you with an income, what about your business and the fixed costs or overheads that you are required to pay?

A Business Expenses policy helps to cover your fixed business costs by paying a monthly benefit to your business if you are unable to work due to a sickness or accident. Business costs covered may include:

  • Accounting and audit fees
  • Utilities including gas, water and electricity
  • Cleaning costs
  • Advertising costs and more.

A waiting and benefit period and a maximum monthly benefit will also apply to business expenses insurance.

Tax Implications

Business Expenses premiums are generally tax deductible. As the premiums are tax deductible, any benefit you receive will also be tax assessable to the business.

It is always important to speak to an accountant or a taxation specialist before making any decisions.

Keyman Insurance

Protecting your income and being able to pay your fixed business costs are not the only ways you can protect you and your small business.

A Keyman Insurance policy allows you to insure a key person of your business in the event they either pass away or become totally incapacitated that they are unlikely to be able to return to the business.

There are three options when it comes to taking out Keyman policies:

  • Revenue Protection – Protects your business from lost revenue due to the loss of a keyperson to the business by paying a lump sum benefit to the business.
  • Capital Protection – Allows your business to repay any outstanding loans for which a keyperson who has had to remove their obligation to the business was a guarantor for.
  • Buy/Sell Agreement – A structure put in place designed to protect the ownership interests of a business when there are multiple owners. The policy is set up in such a way that it provides funds for the surviving business owners to purchase the shares of the business owner no longer in the business. who has to leave the business.

Each option allows you to protect certain aspects of your business and it is important to speak to your financial adviser about each option and how they can help you.

Tax implications:

Revenue protection premiums are generally tax deductible with benefit paid out being tax assessable. Capital Protection premiums are not tax deductible however the benefit is not tax assessable. Please note: you must seek professional advice from an accountant or taxation specialist with regard to the taxation implications associated with these products.

If you would like to discuss what various policy options are available to you for your small business or if you would like to compare your existing business insurance policies policies, please contact us on 1300 135 205.

Published: April 24, 2014

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