Understanding Insurance Minimums and Requirements

Trades Insurance: Do You Need Business Expense Cover?

Tradie insurance doesn't just involve covering your vehicle, tools and income — you can also extend your protection by adding more benefits to your coverage.

For example, business policies can also cover your operating expenses. What is business expense insurance? Should you add it to your portfolio?

What Is Business Expense Insurance?

When you run your own business, the money you earn doesn't just give you an income; it also covers your regular operating costs. Business expense insurance gives you a way to meet these operating cost commitments if you can't work for a period of time.

What Does Business Expense Insurance Cover?

Business expense insurance targets fixed costs. So, for example, this coverage helps you pay for things like the following:

  • Rent for business premises.
  • Leasing or hire costs on vehicles, office equipment and tools.
  • Employee wages.
  • Utility bills.
  • Payments for other business insurance policies.
  • Some contractual payments, like advertising contracts.

This insurance only covers payments that your business has to make regularly or on a contractual basis. So, before you take out expense coverage, think about whether you need it.

Do You Need Business Expense Insurance?

The easiest way to assess if you need this coverage is to calculate your fixed business costs. Add up all the payments your business must regularly make. You may make these payments weekly, monthly or even annually.

Once you have a figure, ask yourself whether you could make these payments if you weren't able to work. If you run your business from home, own your vehicle and only have small fixed cost commitments, then you might be able to afford to make these payments without extra business expense coverage. However, if you have a lot of fixed expenses that you couldn't pay if you aren't earning, then business expense insurance could be vital. Without it, you could lose your premises, vehicles, equipment and staff. Plus, if you can't meet contractual payments, your business's credit record suffers. This could affect your ability to get financing in the future.

Not all business expense policies give the same amount of coverage for the same things. If you aren't sure what kind of policy will best suit your business, talk to your insurance broker. They can help you work out if this kind of insurance is a good idea. If you decide to go ahead, then they will search the market to find the most cost-effective coverage for your needs.