Income Protection Insurance Self Employed Australia – Considerations For The Self-Employed

income-protection-insurance-self-employed-australia-example1 Income protection insurance self employed Australia is meant to provide an income stream in case you are unable to work due to physical injuries or illness. This type of insurance provides a replacement income that goes beyond your sick leave days. You enjoy up to 75 percent of your gross income as income insurance benefits. Australians who are self-employed can also obtain this type of cover. However, certain considerations must be made when purchasing your policy since your needs as a self-employed individual or small business owner may differ from those of an employed individual.

Benefit amount

For the self-employed, income protection insurance pays 75 percent of the income generated by the business as a result of their personal exertion, although their share of the expenses is deducted. There are two main types of insurance policies you should consider; these are indemnity and agreed value policies. With an indemnity policy, your benefit amount will be based on the amount you earned in the months preceding you leaving work. However, because of the nature of small businesses, the benefit amount could be very low if the business was not performing well right before your illness or injury.

Agreed value policies

Most self-employed Australian insurance buyers visit ATO for more info and prefer agreed value insurance policies. This type of policy allows you to set the benefit amount when applying for insurance. The agreed amount is based on your average income at the time you apply for coverage. This means that your benefit amount will not change with time. However, note that the premium payments for agreed value income protection policies are usually 20 percent higher than those for indemnity policies. If you are a member of a super fund, you may be able to obtain income protection insurance via the super. However, superannuation funds typically don’t offer agreed value policies.

Cover limits

Most income protection insurers are unwilling to provide insurance for those who are newly self-employed with a business history of less than 12 months. However, if you had worked in the same industry as an employee, you can apply for an indemnity income protection policy and then later change it to an agreed value policy once you have at least 12 months of trading history. In addition, a lower percentage of income may apply if your income exceeds a certain limit, depending on your insurers. Most insurers also provide a maximum level of monthly benefit amounts.

Waiting period

You could lower your premium amount by selecting a longer waiting period for your policy. Waiting periods range from 14 days to 2 years, but you will need to consider how long you will be able to survive without your monthly income when setting the waiting period. Note that you will still have to meet all your financial commitments during this period, including your mortgage or loan repayments.

You can easily apply for income protection insurance and claim tax deductions on your premiums as long as you are an Australian resident between 18 and 59 years. In addition, certain income protection insurers do not require you to undergo medical or blood tests during your application. You can speak to your financial planner to assess your insurance needs so you can purchase the most appropriate policy for you.

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