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Self employed insurance

Explore your options for work insurance when self employed in Australia.

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Being your own boss has its perks such as setting your own hours. However, being self-employed means you won't have the same benefits that regular employees have access to, such as sick leave and workers compensation insurance.

When you consider how important your health is to your ability to earn an income, it's clear that taking out some form of insurance cover is crucial. So what type of cover should a self-employed person take to protect themselves, their family or their business?

What are the benefits of income protection for the self-employed?

Financial protection should be a key consideration for anyone who is self-employed and income protection is a key form over cover. When you are injured or sick and unable to work for an extended period, income protection insurance provides an ongoing monthly benefit to replace your regular income. Some of the advantages that this type of cover can offer to self-employed workers include:

  • Replacement income. Without your income to rely on, you and your family can soon find yourself in financial trouble. Income protection insurance ensures that this doesn't occur.
  • Workers' compensation. While self-employed workers don't qualify for workers' compensation cover, income protection provides similar cover but also includes protection for injuries and illnesses that are unrelated to work.
  • Manage your obligations. Even though you are unable to work you will still have financial obligations from a personal and a business point of view. Income protection ensures that you can stay on top of these and simply focus on your recovery.
  • Tax deductible. Premium payments for income protection cover are tax-deductible.
  • Can be funded through your super. Though many people aren't aware of it, you can take out income protection cover through your superannuation fund and pay for your premiums using your super balance.

Compare income protection for self-employed people

Tip: You may be able to claim your income protection premiums as a tax-deduction.

Data indicated here is updated regularly
Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Waiting Period Options Policy Type Apply
AAMI Income Protection
$10,000
75%
5 years
Apply directly online
Insuranceline Rate Saver Income Protection
$10,000
85%
5 years
Apply directly online
Get a $100 bonus gift after 2 months. Plus get 12 months cover for the price of 11 if you pay annually. T&Cs apply.
TAL Accelerated Protection Income Protection
$30,000
75%
To Age 70
Underwritten via a broker
AIA Income Protection
$30,000
75%
To Age 70
Underwritten via a broker
MLC Income Protection
$30,000
75%
To Age 70
Underwritten via a broker
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Insurance available to self employed workers

  • Trauma Insurance. Covers you if you go through a major illness e.g. heart attack or cancer
  • Disability cover. Covers you if a total and permanent disability forces you out of work.
  • Liability insurance. Covers you if an accident happens to someone else as a result of your work.

Do you need key person insurance?

In many business of all sizes, there are certain key people without whom the company would fall apart. In addition to the owners of the business, these key people are often termed irreplaceable - if they were to die unexpectedly or become disabled and unable to work, the financial impact of this upon the business could be huge. This is where key person insurance comes in, providing financial protection against the impact of the death, disability or incapacity of a key employee. The advantages this type of cover offers for the self-employed includes:

  • Tailored protection. Self-employed business owners can identify the person(s) that are critical to their business and take out a policy on those specific individuals.
  • Ownership security. Key person insurance can help protect each party in a partnership when the other partner dies. This makes the transition of ownership much smoother.
  • Find a replacement. This cover can be used to cover the cost of finding, recruiting and training a new employee.
  • Pay debts. Use your key person insurance benefit to settle any loans and outstanding debts.
  • Covers business losses. Cover the cost of any lost sales, profit or goodwill as a result of the key person’s departure.

What is a buy-sell agreement and do I need it?

Buy-sell life insurance agreements offer a critical form of protection for business partnerships. Under such an agreement, the partners take out a life insurance policy on their co-owner but not on themselves. When one of the partners dies, his or her co-owners receive a lump sum life insurance benefit which they can then use to buy out the deceased’s share in the business from their surviving family members. The benefits of these agreements for self-employed people include:

  • No financial loss for the company
  • Smooth ownership transition in what could otherwise be a very difficult and potentially messy situation
  • Ensures that the surviving owners have the funds they need to buy out the deceased’s share
  • The family of the deceased partner gets a fair deal and suffers minimal financial impact from the death of their loved one
  • Buy-sell agreements can also be taken out to cover trauma or total and permanent disablement
  • Available in a variety of ownership structures (cross ownership, self ownership, corporate ownership etc) to suit a business’s needs and tax requirements

Is business expenses insurance something I should look at?

If you’re a business owner and you are injured or fall ill, it’s important that you are still able to pay your ongoing business expenses. This is where business expenses insurance comes to the rescue. Not to be mixed up with business insurance, business expenses insurance covers the fixed expenses of your business when injury or illness strike. It is owned by the company or partnership and the business owner is then listed as the life insured. It offers a benefit when you suffer a total or partial disablement, allowing you to cover costs like:

  • Accounting fees
  • Advertising costs
  • Utilities, heating, cleaning costs
  • Phone and internet costs
  • Security costs
  • Rent and rates
  • Professional body membership fees
  • Bank charges, interest on loans
  • Business-related insurance premiums
  • Salaries of non-income-generating employees.
This type of cover is available for sole traders and partnerships and is payable to the person responsible for managing the business’s expenses.

How does Workcover for the self-employed work?

While WorkCover insurance is a mandatory requirement for many Australian employers, sole traders and partnerships are often not able to benefit from the cover provided by this form of insurance. As sole traders are not defined as workers, they usually have no legal requirement to take out cover unless they exceed wage thresholds or employ a trainee. In some cases, sole traders and partnerships can consider establishing a Pty Ltd company and then becoming an employee of that company - this may entitle them to workers’ compensation cover. If this is not an option, however, they may wish to consider taking out income protection insurance or accident-only cover.

How do I find the right cover?

  • What cover do I need? You’ll need to take the time to assess exactly what sort of cover you need. Do you want protection against accidents only, or for accidents and illnesses? Do you need death cover only or do you want cover for a wide range of potential risks? You’ll have to consider the financial obligations you will need to meet and how much insurance you’ll need to have in place to satisfy them.
  • What cover is available? Finding the right policy can be a confusing exercise. From workers’ compensation to income protection, accident insurance, buy-sell agreements, key person insurance and more, compare the features and benefits offered by these different policies to know which one will offer the best coverage for you.
  • How much does it cost? Cost is always an important consideration for any business, but make sure you weigh up not only the price but also whether you are getting value for money. Comparing quotes is quick and easy, so obtain multiple quotes to get a good idea of the price you will have to pay.
  • Who is the insurer? Remember to look beyond the policies available and research who is offering the policies. Are they underwritten by a trusted provider with a long history in the industry?

Protect your business today and speak with an adviser

As this article demonstrates, there are a wealth of options available for people who are self-employed and seeking financial protection against a range of events. Of course, it’s important that you do your research and shop around to ensure that you end up with the right type and level of cover.

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