Income protection insurance for the self-employed: things you should know

Income Protection -

Being self-employed can be rewarding in many ways. However, when you’re running your own business it’s important to factor financial protection and insurance into your plans.

Can you get income protection insurance if you’re self-employed?

Yes. If you are self-employed then you can still apply for income protection insurance. It doesn’t matter if you are a business owner or a contractor, you can generally apply as long as you work in paid employment for a minimum of around 20 hours per week (this may differ between policies). The amount of cover you can take out will vary depending on the policy you select and how much you earn. Typically, income protection insurance can provide regular payments based on a proportion of your earnings (typically up to a maximum level of earnings) if you are unable to work due to illness or injury.

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

Running your own business can be stressful, but have you considered what would happen if you were unable to work? How would the business be affected, and what difference would it make to your families lifestyle? As a self-employed person or small business owner, you may not be entitled to some of the safety nets that come with working for an external organisation, like sick leave, personal leave or workers’ compensation.

Income protection insurance can provide you with greater financial peace of mind by ensuring you can keep up with your bills and outgoings even if you are unable to work.

Is Business Expense Insurance the same as Income Protection?

You may also have heard of some self-employed people purchasing business expense insurance. This type of insurance is designed to cover certain business expenses (set out in the relevant product disclosure statement) in the event that you are unable to work due to illness or injury and, therefore, may not offer the same breadth of benefits as income protection. Unlike business expense insurance, income protection provides you with a regular income that can be used to cover any costs you may have, including keeping your household going via mortgage or utilities payments.

How are income protection premiums calculated if you are self-employed?

Income protection premiums depend on a few factors including, but not limited to, your age, occupation type and the terms of your cover. For example, income protection can vary in inclusions, exclusions and definitions of disability. The first step in calculating your premiums will be to choose your level of cover, which is typically based on your income and costs.

It can be more challenging to establish a specific income amount for a self-employed person, as this figure can tend to change year on year. Typically, your income is the amount your business earns, minus any costs it incurs but its best to check with each insurer. Often insurers will request to see copies of previous years’ tax returns to get a sense of your income.

Depending on how you pay for your income protection, the insurance premiums may also be tax deductible. It’s always best to check with your accountant.

How to choose the right income protection policy: tips for selecting the right policy, including the benefits and features that matter most

It is important to compare income protection insurance before you purchase it, to ensure it provides you and your business with the cover you need. You should always check the Product Disclosure Statement (PDS) of any policy before you purchase. Features to consider include:

  • The maximum benefit amount – this is how much you will receive on a monthly basis should you need to claim under your policy.
  • The waiting period – this is how long you will need to wait between becoming unable to work due to illness or injury and receiving an income protection benefit.
  • The benefit period – this is how long you may be able to receive payments for if you are unable to work due to illness or injury.
  • Additional features or extras such as recurrent claim, bed confinement or partial disability benefit.
  • The application of any offsets which reduce the amount of benefit provided if you receive certain other payments– these will be set out in the Product Disclosure Statement

Your income protection insurance might be part of a range of life insurance cover that suits your needs, including death cover or total permanent disability insurance.

If you are self-employed and looking for income protection insurance, you can use the TAL Coverbuilder to find the level of cover that suits you.


Any financial product advice is general in nature only and does not take into account any person’s objectives, financial situation or needs. Before acting on it, the appropriateness of the advice for any person should be considered, having regard to those factors. Persons deciding whether to acquire or continue to hold life insurance issued by TAL should consider the relevant Product Disclosure Statement (PDS). The Target Market Determination (TMD) for the product (where applicable) is also available. Life insurance issued by TAL Life Limited ABN 70 050 109 450 AFSL 237848.

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