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Being self-employed comes with a lot of perks. But have you ever thought about what would happen if you suddenly become disabled and were unable to work? For many independent contractors and small business owners, income protection insurance may provide a safety net in case the worst happens.
Let’s begin with the basics. Income protection insurance is a type of life insurance that may help by paying you a part of your income in the event that you’re unable to work for a period of time due to an injury or illness, subject to policy terms. Income protection insurance can pay up to 70% of your income, up to the limits of your policy, which may help cover things like:
According to the government’s MoneySmart website, income protection insurance could be a consideration if:
However, for independent contractors like small business owners or subcontractors, income protection insurance may be even more crucial. If you’re self-employed, missed days on the job could mean less money going into your bank account. And if you become temporarily or permanently disabled, those weeks of missed income could really add up.
For example, let’s say you’re a subcontracting tradie. If you fall seriously ill or are injured and can’t return to work for a while, your income protection insurance may provide you with a steady income, subject to policy terms.
If you’re self-employed, knowing that you can still have an income for a period of time even if you were unable to work due to an illness or injury can take a big weight off your shoulders. On top of paying up to 70% of your income while you’re unable to work subject to policy terms, income protection insurance could offer key benefits like:
It’s essential that you check the Product Disclosure Statement before deciding on a policy which outlines policy conditions, exclusions and limitations.
Monthly premiums will depend on a number of factors, like your age, whether or not you smoke, and your occupation. Usually, when picking an income protection insurance policy, you’ll usually have two options when it comes to determining how much you’ll pay.
Stepped premiums are recalculated each time you renew your policy, and may increase each year as you get older. Level premiums are usually set higher at the start of your policy, but usually increase less frequently and are independent of age.
Curious about how much you might pay each month? iSelect has partnered with Lifebroker to help you compare Income Protection insurance policies on offer from their range of products and providers. You may want to keep in mind that your policy may also be subject to waiting periods or benefit periods.
A waiting period is an agreed-upon amount of time you will need to wait before approved claim payments would start. Income protection policies typically offer waiting periods between 14 days and two years. As a general rule, the shorter the waiting period is, the more expensive the policy would be.
The benefit period is the length of time that monthly payments would last should you claim. Some policies may give the choice between two or five years, while other policies could pay out until a certain age, like 65.
Life insurance policies typically take the form of ‘Indemnity value policies’. With this type of policy, if you make a claim , you’ll be paid according to a percentage of your salary at the time. People with a stable income may be more likely to choose this policy.
If you’re self-employed and thinking about purchasing an income protection insurance policy, you’ve come to the right place. At iSelect we’ve partnered with Lifebroker to make it easier for iSelect customers to compare income protection policies from a range of providers, and apply for cover. Click here to get started today.
Last updated: 27/07/2021