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Covering Ongoing Business Expenses If You Can’t Work

Income Protection (IP) is a policy most medical professionals are aware of but if you are self-employed, do you have the right policy to cover ongoing fixed expenses of the practice?

IP covers up to 75% of your gross income but it doesn’t provide additional cover for things like rent, administration wages, equipment leases, net cost of a locum, business loans etc.  This is where Business Expense (BEX) comes into play where it works similar to IP in that there is a waiting period but it allows you as a practice owner to cover up to 100% of fixed ongoing items.  Even if you are in a partnership, you may be responsible for your share of service fees irrespective if you are working or not, hence BEX needs to be considered as part of your overall insurance portfolio.

A lot of self employed clients believe they are covered through business interruption insurance which is a general insurance policy covering the medical premises, however it does not cover you if you are unable to work due to a disability which is what BEX is designed for.

What are the chances you will be unable to work?

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How would you pay these expenses if you couldn’t work?

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Maximum sum insured

Most insurers will allow you to cover up to $60K per month but the level of cover needs to be justified via a Profit and Loss statement.

Importantly, the policy also needs to cover your specialist needs such as blood borne disease, ability to work part time without restrictions and ability to choose your definition at time of claim.  Ensuring there are also no offsets such as ongoing practice profit is also vitally important to ensure there are no reductions on the monthly benefit at time of claim.

Business Expense is a specific self-employed policy that requires specialist insurance advice to ensure the policy is tailored to your needs.

Sources:

  1. Australian Disability Table, 1AD89-93 Class 2
  2. Interim Report of the Disability Committee Institute of Actuaries, Australia 2000.

 

Hayden White

Hayden has worked in the financial services for last 15 years and provides specific direct equity investment advice both for clients that require portfolios inside and outside superannuation.