Sole trader income protection insurance

Sole trader income protection insurance eligibility and exclusions

To be covered by income protection insurance, there are a few criteria you will need to meet, including:

• A minimum income or working hours
• Evidence that shows your income is relatively stable
• Be aged between 18 and 60
• Be an Australian citizen, permanent resident or long-term visa holder

Many insurers will also have their own set of exclusions in their policies. Some of the most common exclusions you may find include:

• Pre-existing conditions
• Participation in high-risk activities or sports, such as rock climbing, jet skiing or skydiving
• Substance abuse
• Elective surgery
• Working in a high-risk job, like construction or mining

How are premiums calculated for sole traders?

The cost of income protection for sole traders is calculated based on several factors, including:

• Age
• Occupation risk
• Health status
• Lifestyle
• Income
• Insurance benefit
• Waiting period

If your income is variable, insurers may average income over several years to determine the payout amount.

How to buy income protection as a sole trader

There are a few different ways you can buy income protection as a sole trader, including:

• Direct: Buy your policy directly from an insurer, online or over the phone.
• Through a broker: Engage an insurance broker for more tailored coverage.
• Superannuation: You can get income protection through your super fund, with premiums deducted from your super balance.
• Through Finder: You can compare several income protection policies using our comparison tool. Compare features such as maximum monthly benefit and benefit period, waiting periods and more. Once you've found a policy you like the look of, hit the 'Get a Quote' button to apply on the insurer's website.

How to calculate your income protection needs as a sole trader

Income protection insurance is highly customisable and you can choose what percentage of your income you'd like covered - within the parameters given by the insurer. Consider these factors when calculating your needs:

• Expenses: Identify unavoidable monthly outgoings, such as rent, utilities, and loan repayments.
• Income: Determine what percentage of your earnings are spent on these critical expenses.
• Savings: Consider other income streams or savings that could cover some of your expenses.
• Supports: Consider other possible financial supports including your partner, or family.
• Waiting period: Think about how long you could cover expenses without your regular income.

How to compare income protection policies

Income protection is crucial to have in your back pocket to ensure you and your loved ones can continue to live comfortably if you can no longer work. But with so many income protection policies floating around, how do you know which one is right for you? To help you compare income protection options, we've listed our top 4 tips:

• Determine how much cover you need. A good place to start is knowing the amount you and your family would need to maintain their current lifestyle. This means taking a look at your current monthly expenses and savings. It might also be a good idea to include a buffer for any unexpected bills.
• Assess policy features. Compare benefit periods, waiting periods, exclusions and even introductory offers. Many insurers may give you a discount for the first month. While you may be able to find an insurer with a sufficient monthly benefit, your period of cover may not be long enough.
• Review the PDS. If you've found an insurer that aligns with your needs, you'll still need to read the PDS before purchasing the policy. While time consuming, it ensures you fully understand what your policy entails and how you will receive payment if you ever needed to make a claim.
• Speak to a professional. Income protection can be a complicated process to get your head around. If you would like a tailored approach to your policy search, we recommend getting in touch with a financial advisor who can recommend policies based on your needs.

How to make a claim on your income protection insurance

If you need to make a claim on your income protection, you'll need to get in touch with your insurer either over the phone or online. While every insurer has their own claims process, you'll typically need to prepare and submit the following documents:

• Medical reports and test results from your doctor
• Details about your work, including the number of hours you work each week and daily responsibilities
• Recent financial statements or details outlining your pay

Before your claim can be processed and approved, your insurer may also want to contact your doctor to confirm medical details or set you up with an independent medical examination who will report back to the insurer regarding your condition.

If your illness or injury continues to prevent you from earning an income, you may need to have regular assessments to maintain cover.

FAQs

• Can sole traders get workers' compensation insurance?

  Generally, no. Sole traders usually aren't classed as workers, so they aren't covered by workers' compensation, although some states let you buy voluntary cover (for example, WorkCover Queensland's Workplace Personal Injury Insurance). It's recommended sole traders take out income protection insurance instead to financially protect themselves and their families if they are unable to work.

• Can you access income protection if you're self-employed?

  Yes. Most insurance brands offer income protection to self-employed people, but you may need to prove your income over a longer time-period compared to employed people. You will also generally need to be an Australian citizen, permanent resident or long-term visa holder. Insurers may exclude, or charge more to cover, pre-existing conditions and high-risk activities or occupations.

• What insurance do I need as a sole trader?

  Aside from income protection insurance, as a sole trader and depending on the sector you work in, you may also want to consider public liability and professional indemnity insurance. Public liability insurance covers injury or property damage caused to others by your business while professional indemnity insurance protects you if a client claims you made a mistake or gave bad advice.

• What are the disadvantages of income protection?

  When considering any financial product, it's important to consider the entire scope before purchase. Some of the things to remember about income protection is that it often doesn't cover pre-existing conditions, and if the insurer does, you may have to pay additional fees to guarantee cover. Depending on the insurer, you also won't receive your first payment until a month after your waiting period. This can put a big strain on your finances and may force you to depend on your savings more than you'd like to. Your premium may become more expensive as you age and you may not be able to get cover after 60.