Business Overheads Cover in NZ: Keeping the Doors Open if You're Off Sick

Income protection covers your wage, not your rent and leases. Here is how business overheads cover works in NZ, what it pays, the tax rules, and how it sits alongside ACC.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances.

When you run a small business and you can't work, two different bills land at once. Your own income stops, and so does the business's revenue — but the rent, the lease payments and the accountant's fee carry on regardless. Personal income protection is built to replace your wage. It is not built to pay the firm's fixed costs. Business overheads cover (also called business expenses cover) is the policy that does that second job.

This guide explains what business overheads cover pays, how it differs from personal income protection, the NZ tax treatment, and how it works alongside ACC if you are off due to injury rather than illness.

TL;DR: Around 97% of New Zealand businesses have fewer than 20 staff ¹, so one owner being off sick can stop revenue entirely. Personal income protection replaces your wage; business overheads cover reimburses the fixed running costs — rent, leases, loan interest, ongoing wages — usually for a benefit period of around 12 months. Premiums are generally deductible and the benefit generally taxable ⁶.

What is business overheads (business expenses) cover?

Business overheads cover is a monthly benefit that reimburses the regular fixed running costs of your business while you are unable to work because of illness or injury. It is designed for owner-operators — the people whose business largely stops earning the moment they do.

That describes most New Zealand firms. About 97% of NZ businesses are small businesses with fewer than 20 employees ¹, and at February 2025 there were 617,330 enterprises, with 74% of them having no paid employees at all ². For an owner with no staff to keep the work flowing, a few months off can mean no revenue coming in while the overheads keep going out.

The cover works on a reimbursement basis. You do not receive a flat lump sum; you claim back the actual fixed costs you have incurred, up to the monthly amount you insured. The aim is narrow and practical — keep the business solvent and the doors open long enough for you to recover and return, or to wind things down in an orderly way rather than a fire sale.

How is it different from personal income protection?

The two policies sit side by side and cover different things. Personal income protection replaces a portion of your income — the money you take home. Business overheads cover reimburses the business's fixed costs — the money the firm has to spend to keep existing whether or not you can work.

The figure below sets out who pays what.

Income protection vs business expenses cover: who pays what

Source: insurer PDS comparison; IRD on business expense treatment ⁶. Cover and terms vary by policy.

The clean way to picture it: income protection keeps food on your table; overheads cover keeps the lights on at the business. Many owner-operators need both, because one does not do the other's job. If you want the personal-income side explained in full, our guide on income protection for contractors and the illness gap ACC leaves behind covers it.

Whether a claim is paid depends on the terms, conditions, exclusions, stand-down periods and underwriting of the specific policy, and on your disclosure. This is a summary only — always read the policy wording or product disclosure statement.

Which fixed costs does it actually pay while you're off work?

The point of overheads cover is that it pays for ongoing, fixed, regular business expenses — the ones that do not stop just because the work has. Most policies list eligible costs in the wording, and the common ones are:

• Rent or lease on business premises
• Lease payments on equipment, plant and vehicles
• Interest on business loans and finance
• Salaries and wages of employees who are not the owner or a co-owner
• Electricity, gas, water, phone and internet for the business
• Property and contents insurance, and other regular business insurances
• Professional and association fees, accountancy and audit costs
• Rates, and security or cleaning contracts

What it generally does not pay is just as important. Overheads cover is not meant to fund profit or growth, so it usually excludes:

• The owner's own salary, drawings or share of profit (that is what personal income protection is for)
• Cost of stock, raw materials or goods for resale
• Depreciation and capital purchases
• Any expense that only arises because revenue is being earned

Because it is reimbursement-based, you can only ever claim costs you actually incur, up to the monthly limit. If your real overheads in a month come in under your insured figure, you are reimbursed the lower amount — you do not pocket the difference.

How long does it pay for and what wait period should you choose?

Two settings shape the policy: the benefit period and the wait period.

The benefit period for overheads cover is usually short by design — commonly around 12 months. That reflects its purpose. It is there to carry the business through a defined recovery, or to give you time to make a decision about its future, not to subsidise it indefinitely. This is a key difference from personal income protection, where benefit periods often run for years or to age 65.

The wait period (or stand-down) is how long you wait after becoming unable to work before reimbursements begin. Shorter wait periods cost more but start paying sooner, which matters when rent and lease payments fall due monthly regardless. Some owners hold a cash buffer and choose a slightly longer wait to reduce the premium; others keep it short so the cover lines up with when the bills actually arrive.

One reference point worth knowing if injury is the cause: ACC weekly compensation generally begins from day 8 of incapacity, with the first week not covered ⁵. That timing is about your personal earnings, not your overheads — but it is a useful marker when you are thinking about how long your business could self-fund before any cover kicks in.

How much overheads cover should a sole trader or small firm hold?

The sensible starting point is your actual fixed monthly overheads — the costs that would carry on if you stopped work tomorrow. Add up rent, leases, loan interest, non-owner wages, utilities, insurances and professional fees, and that total is the monthly figure the cover is built around.

A few things people weigh up when setting the amount:

• Use real numbers. Your accountant or your accounting software can usually pull a clean list of fixed monthly costs. Insuring a guessed figure risks being either over-covered (paying for cover you can't claim, since it is reimbursement-based) or under-covered (a shortfall every month).
• Separate fixed from variable. Only the regular, ongoing costs belong here. Costs that rise and fall with sales generally don't.
• Review it when the business changes. A new lease, a bigger loan or a new staff member all change the figure. Cover set three years ago may no longer match.

Factors that influence the right amount for any given business include its fixed-cost base, how much cash it could draw on, and whether anyone else could keep it trading. Every situation differs, so personalised advice works through what fits yours. Pulling your fixed costs together is also a good prompt to look at the wider picture — our self-employed financial checklist covering KiwiSaver, ACC and income cover sets the whole plan out in one place.

Is the premium deductible and the benefit taxable in NZ?

For business overheads cover the general position is straightforward, because the policy reimburses ordinary deductible operating costs. Under IRD's treatment of business expenses, premiums for this type of cover are generally deductible, and benefits received are generally assessable as income ⁶.

The logic is symmetrical. You claim the premium as a business expense, so the payout is treated as taxable business income — which makes sense, because that payout is then used to pay the deductible overheads it was meant to cover. In effect the benefit comes in as income and goes straight back out as expenses, broadly netting off.

This differs from many personal lump-sum policies, where the premium is not deductible and the payout is tax-free. It is worth confirming the exact treatment for your structure, because how a business is set up can affect the detail.

Smiths Financial does not provide tax structuring advice. This is general information only — please confirm the treatment for your situation with your accountant or an appropriately authorised tax professional.

How does it work with ACC if you're off due to injury?

ACC matters here, but it is important to be precise about what it does. ACC pays weekly compensation for loss of earnings of up to 80% of your pre-injury gross earnings — and only for injury, not illness ³. That compensation replaces a portion of your personal income. It does not pay your business's rent, leases or loan interest.

So even when ACC is paying — that is, when you are off because of an injury — your business overheads are still exposed. ACC fills part of the personal-income gap for injury; it does nothing for the firm's fixed costs.

Two further limits are worth knowing:

• ACC is injury-only. If you are off because of illness — cancer, a cardiac event, a mental health condition — ACC's weekly compensation does not apply at all ³. Both your income and your overheads are then unprotected unless you have arranged private cover. Our guide on being off work through illness rather than injury explains that gap in more detail.
• ACC is capped. For 1 April 2025 to 31 March 2026 the maximum earnings on which the 80% is calculated is $152,790 a year ⁴, so higher earners face a personal-income shortfall even for injury. At the other end, the minimum full-time rate of weekly compensation is $752.00 gross a week, set at 80% of the adult minimum wage from 1 April 2025 ⁷.

The takeaway: ACC, even at its best, addresses your wage for injury. Business overheads cover is a separate policy doing a separate job — keeping the firm's fixed costs paid regardless of whether the cause was injury or illness.

How do you stack overheads cover, income protection and ACC together?

These three pieces are designed to overlap as little as possible, each covering a different exposure. Lined up together they look like this:

Source: ACC weekly compensation rules and cap ³⁴; insurer PDS comparison. Cover subject to policy terms.

Read down the columns and the design becomes clear. ACC handles part of the personal-income side for injury only. Personal income protection picks up your wage for both illness and injury, often arranged to offset ACC on the injury side so you are not paying twice. Business overheads cover sits on its own, paying the firm's fixed costs for either cause.

Many owner-operators consider all three because each leaves a hole the others don't fill. How much of each is right depends entirely on your fixed costs, your earnings, your ACC setup and what cash the business could draw on. There is no single answer that fits everyone — the point of a review is to map your specific gaps before deciding.

We're generally paid by commission from the insurer when you take out a policy through us; this doesn't change the premium you pay. Some arrangements may involve a fee, which we agree with you first. We manage any conflicts of interest in line with our duty to prioritise your interests — full details are in our Disclosure.

Frequently asked questions

Does business overheads cover pay my own salary? Generally no. Overheads cover is built to reimburse the business's fixed running costs — rent, leases, loan interest, non-owner wages and similar — not the owner's own salary, drawings or profit. Your personal income is covered by income protection. The two policies are usually held together because each does a job the other does not.

What fixed costs are typically covered? Common eligible costs include premises rent, equipment and vehicle leases, business loan interest, salaries of employees who are not the owner, utilities, business insurances, rates and professional fees ⁶. Costs that vary with sales — stock, raw materials — and capital purchases are usually excluded. The exact list is set out in each policy's wording, so always read it.

Is business overheads cover tax-deductible in NZ? For this type of cover the general position under IRD's treatment of business expenses is that premiums are deductible and the benefit is assessable as income, because it reimburses ordinary deductible operating costs ⁶. The detail can depend on your business structure, so confirm the treatment with your accountant or a tax professional.

Will ACC pay my business overheads if I'm injured? No. ACC weekly compensation replaces up to 80% of your pre-injury personal earnings, capped at $152,790 of earnings for 2025/26, and only for injury ³⁴. It does not pay the business's rent, leases or loan interest. Those fixed costs remain exposed unless you hold business overheads cover.

How long does overheads cover pay for? The benefit period is usually shorter than personal income protection — commonly around 12 months. It is intended to carry the business through a defined recovery period, or to give you time to make decisions about its future, rather than to fund it indefinitely. Wait periods are chosen to suit how soon the business needs the cover to start.

Do sole traders with no staff still need it? At February 2025, 74% of NZ enterprises had no paid employees ², and for those owner-operators the business often stops earning the moment they do. Whether overheads cover is worthwhile depends on the size of the fixed-cost base that would keep running. Some sole traders with very low fixed costs may not need it; others with premises and finance commitments often consider it.

Smiths Financial is a trading name of Craig Smith Business Services Ltd (FSP712931), which holds a Class 2 financial advice provider licence issued by the Financial Markets Authority to provide financial advice on personal risk insurance, health insurance, general insurance, KiwiSaver and managed funds. Our advisers, Henry Smith (Financial Adviser) and Craig Smith (Principal Adviser), are bound by the Code of Professional Conduct for Financial Advice Services and the duty to give priority to clients' interests. Craig Smith Business Services Ltd is a member of the Financial Dispute Resolution Service (FDRS), a free and independent dispute resolution scheme. Our publicly available disclosure information is available free of charge on our website and on the FMA Financial Service Providers Register at fsp-register.companiesoffice.govt.nz. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 29 January 2026.