Income Protection for Contractors

You can’t rely on your employer if you're unable to work — but income protection for contractors can pay you a monthly benefit if you get injured or ill anywhere, not just on the job.

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Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Waiting Period Options
AAMI Income Protection
Up to
5 years
14, 28, 60 or 90 days
If you’re an existing AAMI customer, you can save 5% on income protection. New customers can get one month free by paying annually.
Suncorp Income Protection
Up to
5 years
14, 28, 60 or 90 days
Sign up and become a member of Suncorp Benefits. Access savings of up to 15% from major retailers. Existing members can get a 5% discount off their policy.
Insuranceline Income Protection
Up to
5 years
14, 28, 60 or 90 days
Get a $100 bonus gift after 2 months. Plus, and get 12 months cover for the price of 11 if you pay annually. T&Cs apply.
NobleOak Disability Income Insurance
First 24 months: $30,000. Thereafter: $25,250
70% for the first 24 months, 60% thereafter
Up to
Age 65
30 or 90 days
With NobleOak, you can lock in a policy with a benefit period covering you up to the age of 65. Cover limits may go as high as $30,000.
RAC Disability Income Insurance (Only available in Western Australia)
RAC Disability Income Insurance  (Only available in Western Australia)
Up to
Age 65
30 or 90 days
When you purchase RAC Income Protection, WA residents receive complimentary RAC membership which includes access to discounts on fuel, savings on shopping, entertainment and more. T&Cs at
Commbank Income Protection by AIA Australia
Up to
2 years
30, 90 days
Get 20% off your first year's income protection premiums if you apply by 17 Dec 2021. Plus, access to the AIA Vitality program for ongoing discounts and perks.
Bendigo MaxLife Income Protect
Bendigo MaxLife Income Protect
Up to
2 years
30 or 90 days
Take advantage of a 5% joint policy discount with Bendigo. Also, you can unlock policy savings through the wellbeing programme AIA Vitality.

Compare up to 4 providers

What kind of risks are contractors exposed to?

The downside of working as a contractor is that you won’t receive any payment in the event of illness, injury or strike. If you fall ill or become injured, unless you happen to have a substantial amount of money stashed away, you’ll need insurance cover in place.

The challenges you face depend on the job you perform as a contractor. The risks of a construction worker are different from the risks of an admin or office worker, although both professions have their own dangers that must be taken seriously.

Construction workers

According to Safe Work Australia, construction workers suffered most from the following injuries during 2015:

  • Cuts and open wounds (31%)
  • Sprains and strains (21%)
  • Chronic joint or muscle conditions (16%)

As of 15 April 2021, 29 Australian workers were killed at work in 2021, with 4 of those being construction workers. Comparably on the same date in 2020, 13 construction workers died at work.

Manufacturing workers

Safe Work Australia reported that the following issues were the top three dangers facing contractors in the manufacturing sector during 2015:

  • Body stressing, manual handling and musculoskeletal disorders
  • Slips, trips and falls
  • Working with dangerous machinery and equipment

As of 15 April 2021, 2 Australian manufacturing workers were killed at work in 2021. Comparably on the same date in 2020, 6 manufacturers died at work.

Non-manual contractors

People in the health profession face risk of exposure to illnesses and viruses. People in corporate jobs may have to deal with stress as well as other issues such as anxiety and depression. These white collar professions often come with a high salary, so losing that income due to injury or illness can be a massive strain.

What types of insurance are available for contractors?

Aside from income protection there are a few other types of insurance a contractor should look at, depending on their circumstances.

What types of insurance are available for contractors?

Aside from income protection there are a few other types of insurance a contractor should look at, depending on their circumstances.

Insurance TypeProsCons
Income protection
  • Replaces part of your income for a set amount of time
  • Can help you stay afloat financially as you recover
  • Will typically only cover up to 75% of your income
  • Only short-term policies available, which are capped at five years
Trauma insurance
  • Covers you for serious illness or accident
  • Paid out in a lump sum to cover immediate costs
  • Can be bundled with life or TPD insurance
  • The policy doesn't cover all conditions
  • No cover for pre-existing conditions
  • Less comprehensive when bundled
Total and permanent disability (TPD)
  • Covers you for permanent disabilities
  • Can be bundled with private health insurance
  • No cover for temporary disabilities
  • Paid in one lump sum

As a contractor, you need to consider if the lump-sum payment will cover your costs for the time you are unable to work. And what happens when the lump sum begins to run out? Will you be well enough to take on more contractor work?

How do insurers classify contractors?

Insurers classify contractors into a number of different classes depending on the nature of the work they do. These include:

  • Professional Collar. These are highly qualified and specialist occupations, such as people in the health industry and academics.
  • White Collar. This includes office workers with roles that are more mentally taxing rather than physical.
  • Light Blue Collar. This refers to people whose job is less than 20% physical work, such as site managers or supervisors on building sites.
  • Blue Collar. These are tradesmen and women with specialist skills and qualifications but who don't face any particular hazards.
  • Heavy Blue Collar. This category is for people who do manual labour that is not hazardous.
  • Special Risk. This refers to people who work in high-risk situations requiring special qualifications.

Looking at the kind of job you have and how you may rate on this list can help you determine if you need income protection. A white collar worker may not seem to be a candidate for insurance as it is difficult to suffer an injury in the office, but don’t forget about stress and other mental illnesses which can result in you being unable to work.

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Income protection for freelancers

Freelancing is itself a form of contracting. Generally freelancers are self employed and often work remotely. As a freelancer it's equally important to protect your income if something should happen and your source of income vanishes.

There are a couple of things freelancers need to consider to find the right income protection insurance.

EligibilitySome insurers won't offer income protection insurance to freelancers. If you have no other employment and freelancing is your primary source of income you may need to meet other conditions to be eligible. Some insurers require you to have been working for more than 12 months and for more than 20 hours a week.
Benefit periodThe benefit period is the amount of time you will receive a benefit. You will be able to select a period from six months to five years. Freelancers do not have the advantage of sick leave or workers compensation. For this reason, it is worth considering a longer benefit period.
Waiting periodThe waiting period is the amount of time you will need to be not earning an income before you can receive a benefit from your policy. Again, freelancers without leave should consider a short waiting period. You can select how long you want the waiting period to be when you purchase insurance.
EligibilityFreelancers should be aware of the general exclusions of income protection policies. You will not receive a benefit if your claim is related to:
  • Pregnancy or childbirth
  • Mental disorders
  • Self harm
  • Drug or alcohol use

I'm a contractor: how will insurers determine my income and benefits?

As a contractor applying for income protection insurance, an insurer will calculate your earnings based on several possible factors:

  • The money you've earned from contracting projects that have been fully completed.
  • Your last three months of earnings.
  • Some insurance companies ask contractors to provide copies of any contracts they currently have in place.
  • Insurance providers may also request evidence of a consistent income for the previous two financial years.

How much does income protection cost for the average contractor?

No two workers have exactly the same needs and this is particularly true of contractors. The cost of income protection insurance depends on:

  • Your age
  • Your average income
  • The type of work you perform as a contractor

The following quotes are examples for a lawn mowing contractor, but the price of an income protection policy will vary widely depending on the type of work a contractor performs.

*These are example quotes only based on a 35-year-old, non-smoking male lawn moving contractor in NSW. These quotes are accurate as of June 2017 and may not be the same for you.

Crane on building site

How can I find the right income protection insurance for me?

You need to check the various product disclosure statements of companies which provide these policies. In general, you should look at these items in your policy:

  • Definitions. Make sure there is a clear definition of your occupation (and how you are covered).
  • Benefit limits. Many policies have an upper limit on benefit payments and typically won't cover more than 75% of your income. Always check a policies limits, especially if you're a high-earning contractor.
  • Stepped versus level premiums. Stepped premiums start cheaper but rise over time, while level premiums typically stay flat (adjusted for inflation). Learn more about the differences between the two.
  • Benefit period. Most income protection policies will pay benefits for a set period, usually between one and five years. Many policies don't pay out after age 65 so depending on your age you may need to find one that does.
  • Waiting period. Policies require claimants to wait for a set period, usually between 14 and 90 days. Consider how long you can afford to go without income when comparing policies.

Are contractors eligible for workers' compensation?

In some cases, contractors are eligible for workers' compensation if they can be classed as employees or workers. This depends on:

  • Their degree of control over how work is performed
  • Their hours of work
  • The work they are expected to complete
  • Their level of financial risk
  • How their superannuation is handled
  • How they are paid
  • Whether they receive paid leave
  • How they pay tax
  • Whether they use their own tools and equipment or an employer's
Determining whether someone is a worker or a contractor is a complex process. It’s even possible for someone to be hired as a contractor and be a contractor for other purposes such as tax, but still be classified as a worker when it comes to workers compensation.

Why contractors should still consider income protection even when they're eligible for workers compensation

  • Not covered at work. Even if you do qualify for WorkCover, you may have to wait to receive benefit payments under the scheme. Benefits may even be withheld while your level of disability is assessed.
  • Changing legislation. WorkCover is always subjected to legislative change from state or territory governments, which can muddy the waters even further. For example, in July 2012 the NSW state government announced changes to WorkCover legislation which capped medical benefit assistance to injured workers.
  • Increased level of cover. Income Protection offers a greater level of cover 24 hours a day—not just when you’re at work. Income protection cover also includes other benefits like childcare cover if you die, and lump sum payments for workplace injuries that result in death or total and permanent disablement.

Are there other insurance options for contractors?

In case you’re not eligible to apply for income protection, there are a few other types of insurance cover you can take out to offer financial assistance when you’re sick or injured:

  • Personal accident insurance: If you suffer an accidental injury, personal accident insurance will provide cover by paying up to 75 per cent of your regular income in either lump sum form or as a monthly benefit. Unlike income protection insurance, it doesn’t offer any cover for serious illness. As a result, premiums for personal accident insurance are typically more affordable.
  • Accidental death insurance: Accidental death insurance is a straightforward and affordable type of life insurance that provides a lump sum benefit payment for accident-related death or accidental injury. The death of the person insured must not be in any way linked to their state of mental or physical health. This type of cover can offer financial security to your family when you’re gone.

Get income protection insurance for contractors

If you are a contractor or freelancer, you should also consider taking out other types of insurance to help protect your business and source of income.

  • Business-based home insurance. If you run your freelance business from home then you'd better double check the exclusions on your home and contents policy. Many home insurance policies have exclusions for business use. You might need a separate, specific policy to cover your home office equipment.
  • Professional indemnity insurance. If you provide professional advice as part of your work you need to think about indemnity insurance. This protects you against liability claims made by clients to whom you provide advice. It's a good type of insurance for freelance consultants, agents and specialist advisers in a variety of fields.
  • Public liability insurance. This type of insurance protects your business against damages caused to a third party or their property. If you have customers visit your premises as part of your work then public liability insurance is worth considering.
  • Business car insurance. Many contractors rely on a vehicle to get around and transport goods or equipment. As with a home office, many car insurance policies specifically exclude vehicle cover for business uses. Car insurance for business vehicles covers you in this case.

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