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Income Protection for the Self-Employed

What would happen to your business in the event that you were suddenly unable to work? Thankfully, Income Protection exists to provide policyholders with a stream of regular income when they're unable to return to work.
3
minute read

If you’re one of the 16.32% of Australians who are self-employed, it’s highly likely that the success of your business relies on your ability to go to work and be actively involved in operations. Depending on your business structure, you might have a support team or business partner, but there’s no doubt that your lifestyle and perhaps that of your family relies on your income. 

So, have you considered what would happen to your business if you were unable to work as a result of an accident, illness, or injury? Would your business be able to continue operating? Would your family be able to continue their lifestyles if you weren’t bringing in an income? 

While 44% of Australians have experienced some degree of income loss due to sickness or accident, only 27% had protected their income through insurance, and less than 20% said they even had a proper understanding of income protection insurance.

In this article, our business insurance advisors dive into the importance of income protection insurance for self-employed workers and what you need to know to protect your business.

What is Income Protection for the Self-Employed? 

Income protection is a form of life insurance that provides policyholders with peace of mind in the event that they are left unable to work due to injury, illness, or an accident. Through receiving continued, regular payments, policyholders are able to focus on their recovery and rest assured that they will still be able to provide for their family and meet their financial obligations, even while they’re out of work. 

Income protection insurance is particularly important for those who are self-employed because they often have less workers compensation programs or paid leave entitlements.

Why Do Self-Employed Individuals Need Income Protection? 

While working for yourself has many benefits, unfortunately, those who are self-employed don’t receive the same sick leave or employee benefits as those individuals who are employed by someone else. Income protection insurance provides self-employed individuals with reassurance that even though they don’t have access to sick leave, should they be injured, unwell, or suffer from an accident, they can take time off work to recover while still receiving income. 

This helps to avoid presenteeism, and the reduced productivity that results in sick or injured people attending work, so, if you have staff, it’s a good idea to explore group policies for your staff or encourage them to get income protection insurance for themselves.

Income protection can also be fully tailored to meet the needs of the policyholder. Depending on your level of coverage, your policy can cover you regardless of whether you’re on the job site, at home, or even on an overseas holiday! 

What are the Benefits of Income Protection for Self-Employed Workers? 

The most obvious benefit of income protection insurance is that it provides a stream of regular income in the event that policyholders are unable to work due to an injury, illness or accident. The funds they receive can help to cover financial commitments, such as mortgages, credit card repayments, and loans, or other lifestyle needs. 

Unlike Workers Compensation, income protection policies cover policyholders 24 hours a day, 7 days a week and offer financial benefits up to the age of 65. You’ll need to confirm if there is a wait period to start receiving your entitlements, as this is dictated by each individual policy.

Is Income Protection Insurance Tax Deductible for Self-Employed Individuals? 

For most self-employed Australians, the insurance premiums are usually tax deductible, with any benefits paid treated as assessable income. We recommend referring to the terms and conditions of your policy for clarification on your unique policy, or that you talk to one of BlueRock’s tax advisors for tax advice specific to your individual circumstances.

What Self-Employed Individuals Would Benefit From Income Protection? 

Income protection is valuable for every employed individual, including the following kinds of self-employed workers: 

  • Tradies 
  • Contractors 
  • Independent consultants
  • Small business owners 
  • Any self-employed individual who have dependents who rely on their income 

Keep in mind that your income protection premiums will vary depending on what industry you work in and the level of risk identified by your insurance provider.

Self-Employed Income Protection Eligibility

At a minimum, the income protection insurance policyholder is required to be scheduled to permanent part-time work. It’s important to note that some insurers require proof that the policyholder is completing at least 20 hours of paid work per work on a permanent basis. 

Expert Income Protection Advice at the Ready 

To further discuss if Self-Employed Income Protection is right for you and your lifestyle, please get in contact with our experienced Melbourne-based business insurance advisors today for a free consultation. 


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