Business expenses cover

Consider a physiotherapist with her own clinic, off work for seven months after a serious illness. Her income protection policy, assuming she has one, replaces a proportion of her personal income and keeps the household running. It does nothing about the clinic.

The clinic keeps costing money regardless: rent on the rooms, the equipment lease, power, phone and internet, practice software, professional indemnity, annual practising fees, the accountant, and the receptionist who is still employed and still needs paying. Those costs do not stop because the person generating the revenue has stopped. Within a few months the practice is being funded out of savings or wound up — and a practice wound up during an illness is very hard to rebuild.

Business expenses cover exists for that gap. It pays a monthly benefit, on a reimbursement basis, for the allowable fixed operating expenses of the business while the insured owner is disabled. It buys time to survive the absence so there is something to come back to.

The reimbursement basis is the feature most often misunderstood. You are not paid a flat monthly sum regardless of what you spend. You claim the expenses actually incurred that month and the insurer pays them up to the monthly benefit you insured, so lower overheads mean a lower payment. Many policies allow unused benefit to be carried forward within the benefit period, which helps when a large annual cost lands in one month.

Who it suits

• Sole practitioners with premises: physiotherapists, dentists, single-handed GPs, vets, chiropractors, optometrists.
• Small professional partnerships where one partner’s absence removes their share of revenue but not the overheads.
• Owner-operators of small service businesses with a lease, equipment finance and a support team.
• Consultants whose business carries meaningful fixed costs rather than just a laptop.

Who it does not suit

• Contractors working from home or client sites with no premises, leases or employees — few fixed overheads to insure.
• Businesses with several working owners, where the others keep revenue coming and overheads covered.
• Businesses whose costs are almost entirely variable, so they fall away when the work stops.
• Employees. This is cover for a business, not for a person on a payroll.

Because the benefit period is short — commonly around twelve months — this cover answers a different question from income protection, which is designed to survive a long absence, potentially to age 65. Business expenses cover holds a business together through a defined recovery, or keeps it trading long enough to be sold or wound up in an orderly way. They are not substitutes.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• The schedule of claimable expenses. Your biggest overhead may not be on it.
• Whether staff wages are claimable, and which staff. Income-generating versus non-income-generating is where most disputes start.
• Whether interest on business borrowings is claimable — it is on some wordings and not others.
• The waiting period, and whether it matches your income protection waiting period or leaves a gap.
• Whether unused monthly benefit can be carried forward within the benefit period.
• How the policy treats a partial return to work, and whether the benefit reduces proportionately.
• That proof of expenditure is required. Keep the accounts current from the first month of the claim.

Every New Zealand insurer writes business expenses cover to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• The definition of claimable expenses varies between insurers, and the right insurer is the one whose schedule matches your actual overheads.
• Business expenses cover and income protection should be arranged together so the waiting periods, definitions and offsets line up rather than fighting each other.
• The tax treatment of the premium and of the benefit is different from personal cover — an adviser will work with your accountant on it before the policy is issued.
• An adviser can tell you when this cover is not worth buying, which for a contractor with no premises is often the correct answer.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.