Small brokerages which do not have adequate business expenses insurance could be putting their livelihoods at risk.
Crowe Horwath insurance head Maurice Thaung said many SMEs – normally a business with fewer than 50 employees – have not considered the impact that sickness and injury could have on their business.
He told Australian Broker
that brokers running small businesses would be wise to take out business expenses insurance – which allows business operations to continue in the event of temporary injury or illness.
“If you have one main revenue earner, who goes down due to illness, business expenses could go through the roof.”
The cover is underwritten with specific expenses and clauses in it, and usually covers expenses such as rents, rates, premise insurance, utilities, vehicle leasing, bank fees, the salaries of non-income generating employees such as reception staff, and of contractors such as cleaners.
“Imagine if a broker went down, what’s going to cover all of them?” said Thaung.
He points out it is different to business interruption cover, which covers damage to property rather than the individual.
“It’s funny [how] we’ll protect property but not ourselves.
“I think of all these mortgage brokers out there, where their ability to fund themselves [if forced to take time off work] is severely compromised.”
Thaung said Crowe Horwath – a financial services firm – advises more than 200,000 SME clients and while most recognise the need for income protection, insuring fixed business expenses specifically is often overlooked.
Research from Plan
for Life shows only 3.3% of new annual premiums are for business expenses cover, and research from Ross Cameron Business Owner Research shows 92% of small business owners are without expense cover.
To combat these low figures, Crowe Horwath has partnered with Zurich Financial Services Australia to raise awareness in the SME sector that business expenses insurance is equally as important as other types of insurance.
Zurich head of life risk sales strategies and research, Andy Marshall, said business owners fail to understand the difference between other types of insurance and business expenses insurance, contributing to Australia’s underinsurance problem.
“Many people believe that workers compensation, business interruption insurance, or even an income protection policy will cover fixed business expenses if they are unable to work due to sickness or injury," he said.
"Personal income replacement cover is designed to cover up to 75% of an individual’s taxable income from their business. If they have fixed business expenses and no business expenses cover, then they only have half the protection needed.”
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