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Income Protection for the Self Employed


Without any form of paid leave to rely on, income protection insurance can provide a vital safety net for the self employed individual unable to work due to sickness or accident.

What does income protection insurance provide you?

Income protection insurance covers up to 75% of the self employed person’s income, usually for a period of two years, five years, or up to the age of 65.

Types of policies for the Self Employed

Agreed Value:

As their income is often subject to fluctuation, an Agreed Value policy is usually the strongest policy for the self employed. This is because the value of your monthly benefit is based on income earned prior to application, hence it is set in stone and not subject to any changes in income between application and claim time.

Generally, your benefit is based upon 2 consecutive years of income, for which you are required to provide your insurer with supporting tax returns at application.

Indemnity Value:

However, if you are unable to provide the proof of income required at application time to secure an Agreed Value Policy, an Indemnity Value policy would be the next best option.

This policy requires you to prove your income at claim time, which means your benefit is subject to any decrease in income earned between application and claim time. Some life insurance companies will allow you to calculate your pre-disability income on the best 12 months of income earned in the last 2 to 3 years, as opposed to the immediate 12 months prior to claim.

Shorter Waiting Periods for the Self Employed

As the self employed do not have sick leave to fall back on, they may require a shorter waiting period so that they can receive their benefit sooner. It is important to keep in mind that the shorter the waiting period, the more expensive the premiums. The reason for this is that it requires a lesser sickness or accident to keep you off work before you start receiving your monthly benefit.

Business Expenses Cover

Business expenses cover specifically caters to the self employed, ensuring that the fixed expenses of their business continue to be paid if they are unable to work. Offered by all insurance companies as an additional option, your fixed expenses will generally only be covered for 6 or 12 months.

If you would like more detailed information regarding income protection insurance for the self employed, please contact one of our financial advisers today on 1300 135 205.