Income protection insurance: safety net for the self-employed

For many Australians, reaching the peak of your career means getting to be your own boss – so it’s no surprise that 61% of businesses in Australia are self-employed. One of the advantages of being self-employed means you have the freedom to be creative and flexible in how you work and run your business. However, not being employed by a corporate body or an organisation can also mean no personal or annual leave entitlements. 

When things are running smoothly, a lack of paid leave may not seem like a big deal. However, life can be unpredictable and if you suddenly fall sick or get injured and are unable to work, that’s when you can feel the disadvantage of not having any paid sick leave.

That’s where income protection insurance can prove valuable, especially for the self-employed. Whether you're a freelancer, contractor or running your own small business, here’s why you should consider getting an income safety net.

Understanding income protection insurance for self-employed professionals 

It doesn’t matter whether you’re the main breadwinner of the family or if you contribute a supplementary income that provides for luxuries and enhances your family’s lifestyle. If you need to take time off work because you’re sick or injured, then it could mean you’re unable to pay the rent or mortgage and may have to stick to the essentials when grocery shopping or make other adjustments to your lifestyle. It’s not something most of us want to think about, but without protecting your income, the worst-case scenario is possible.

The good news is that, depending on your insurance provider and your preferred policy, income protection insurance could cover you for a portion of your monthly income, up to a set monthly limit. For instance, with Guardian Income Protection Insurance, you can cover up to 70% of your  income, up to $15,000 per month.

As someone who is self-employed, what qualifies as your income for insurance purposes is the total share of your income generated in your business as a direct result of your personal efforts, minus any business expenses and superannuation contributions that you make.

Benefits of income protection insurance for the self-employed 

One of the biggest benefits of income protection insurance for a self-employed worker is obviously the financial aspect. Receiving a regular benefit payment can help to safeguard you and your family’s financial stability, while also helping you take care of any business-related expenses – it’s up to you what you spend your monthly benefits on.

Income protection insurance is available to Australians that work a certain number of hours per week. For example, Guardian Income Protection Insurance is available to Australian residents aged between 18-60 who work at least 15 hours per week. Most policies won’t require you to get medical or blood tests, making them quick and easy to apply for, and it’s something you can typically do over the phone to get immediate cover. Plus, you won’t have to worry about coming up with a specific job title – you’ll be assessed on your actual duties as a self-employed individual.

Things to consider when getting income protection insurance  

If you’re thinking about income protection insurance and how it can act as a safety net should the worst happen, here’s what you should look for in a policy:

  • Benefit period: this refers to the duration of time you will receive your benefit, which can vary from one insurer to another. With Guardian Insurance, you can apply for a benefit period from 6 months, 1 year, 2 years, or 5 years.
  • Waiting period: depending on your policy, there will be a waiting period – this refers to the amount of time you’ll have to wait before your benefit payments start. With Guardian Insurance, you can choose a waiting period of either 30 or 90 days.
  • Tax deductible premiums: depending on your circumstances, you might be able to claim back some or all of your insurance premiums when you lodge your tax return. Speak to a financial advisor for independent advice on whether you qualify and what your options are.

Common misconceptions about income protection insurance for the self-employed 

Misunderstandings about income protection insurance often stem from an overconfidence in your own health – with many people believing ‘it will never happen to me’. The truth is that it could happen to anyone, and as someone who is self-employed, this disruption could create financial difficulties you might not have considered. 

Many income protection insurance policies cover sicknesses such as cancer, Parkinson’s disease, heart attacks, arthritis, rheumatoid arthritis, epilepsy and mental illnesses. Injuries like loss of vision or hearing, brain injury, nerve damage, back injury, burns, broken arm or leg, and amputations could be covered too. Confirm with your insurance provider what is covered before taking out a policy.

Another misconception is that income protection insurance is not something worth getting because you may have underestimated   the amount of savings you would need to pay your bills and maintain your lifestyle in case of a sudden sickness or injury. 

As well as receiving regular monthly benefits, you may also be eligible for additional benefits. For instance, with Guardian Income Protection Insurance, you may be eligible for a rehabilitation benefit if you take part in a rehab program to help you recover from your sickness or injury and get back to the workforce. Or you could get reimbursed for the cost of making your workspace more adaptable to your situation, such as having to add a wheelchair ramp.

An income protection insurance policy can give self-employed workers the peace of mind that they can be adequately protected. Having a regular income stream even when you are sick or injured is not an optional luxury for most of us – it’s a necessity, and the right level of insurance can help to make it a reality.

Weigh up your options

Like every other type of insurance, it’s something you may not think you’ll need – until the unexpected happens. When you can’t work to bring in a regular salary, you’ll be glad to know you took the initiative and protected your livelihood against life’s curveballs.

Ready to learn more about Guardian Income Protection Insurance? Request a quote today.