Operating costs and practice expenses

When the head of the business is out of action

In many businesses and practices the turnover depends on one person. If that person is out through illness or accident, no money comes in while the outgoings stay exactly as they were: rent, leasing, interest, staff wages, energy, contributions and maintenance contracts. Operating costs insurance is what absorbs precisely those outgoings.

In medical and dental practices the cover is known as practice expenses insurance and is particularly widespread there, because the costs of a practice are high and largely fixed. It suits trade businesses, law firms, planning offices and any business where what the owner does cannot be replaced at short notice just as well.

The difference from daily benefits and business interruption

This cover is designed differently from loss of earnings or daily benefit insurance. The latter pays at most up to the level of the net income lost and therefore covers private living costs, not the business.

And unlike business interruption insurance, operating costs insurance pays not only after damage to property but also in the event of accident and illness. The two therefore complement each other: one for damage to the business, the other for the absence of the person. Anyone who has only one of them often does not know where the gap is.

Waiting period, benefit period and scope

Benefits start after an agreed waiting period. The longer that period, the lower the premium. The sensible span is the one you can bridge from your own resources without eating into the substance of the business. The maximum benefit period is usually one year, counted from the start of the incapacity for work.

Self employed professionals can also insure the profit they lose. Further points that should appear in the terms are how a closure ordered by the authorities is treated, whether the cost of a locum is included, and whether damage to practice fixtures and equipment is covered as well. We compare the sets of terms and work out with you what your running costs actually amount to.