Could You Afford Time Off Work Due to Illness or Injury?
Imagine waking up one day unable to work, whether from a back injury, a serious illness, or a workplace accident. Without a regular paycheque, how long could you manage your mortgage, bills, or groceries?
For Australian tradies, freelancers, and small business owners, income is often the backbone of financial security. Unlike salaried employees with sick leave entitlements, the self-employed are far more exposed to the financial shock of being unable to work due to illness or injury.
Income protection insurance is designed to fill this gap, providing cover to a large percentage of your regular income if you’re unable to work temporarily or permanently. It’s not just a safety net — it’s essential protection for your lifestyle, business, and peace of mind.
What Is Income Protection Insurance?
Income protection insurance pays you a regular monthly income when you’re unable to work due to injury or illness. Typically under a “cancelable” general insurance product this benefit covers up to 85% of your pre-tax income and continues for the length of your benefit period, which may range from two years to five years. There are longer benefit periods available under a “non-cancelable” income protection policy.
It’s important to understand that income protection insurance is different from life insurance. While life cover pays a lump sum to your beneficiaries when you pass away, income protection supports you while you recover, helping you manage daily expenses, loans, and lifestyle costs without depleting your savings.
What Does Income Protection Insurance Cover?
Most income protection insurance policies cover the following:
- A monthly benefit based on your regular income
- Illnesses and injuries, regardless of whether they’re work-related
- Option to choose your waiting period (how long before payments begin)
- A benefit period that determines how long payments continue
- Optional features such as rehabilitation benefits, partial return to work payments, or business expenses cover
Many policies also offer income protection insurance quotes tailored to your profession, age, and health profile.
Example:
A carpenter earning $6,000/month opts for income protection with a 30-day waiting period and a benefit period of five years. If he injures his knee and can’t work, the policy pays $4,200/month (70% of income) starting after 30 days, for up to five years or until he can return to work.
Who Needs Income Protection Insurance?
If you rely on your income to cover day-to-day expenses or business obligations, you’re a prime candidate for this cover. Income protection is crucial for:
- Tradies like electricians, plumbers, and builders
- Sole traders and self-employed workers
- Freelancers and gig workers
- Small business owners with no paid leave
- Main household income earners
In these roles, if you’re unable to work due to injury or illness, it’s unlikely you’d be eligible for employer sick leave or workers’ comp. That’s why income protection is designed to offer financial continuity.
Related: Trades Insurance – get cover specific to your trade and business structure
Key Terms You Should Understand
- Waiting period: The time between when you stop working and when your income payments begin (commonly 14, 30, 60 or 90 days)
- Benefit period: The maximum time your payments will continue (e.g. 2 years, 5 years, or up to age 65)
- Income protection premiums: What you pay to keep your policy active; these vary depending on your occupation, age, and coverage
- PDS: The Product Disclosure Statement outlines what’s included and excluded from your policy
- TMD: The Target Market Determination shows which customers the product is appropriate for
How Much Income Protection Cover Do You Need?
Many policies allow you to cover up to 85% of your gross monthly income, although some higher-risk occupations might have lower limits.
Your choice of benefit period and waiting period significantly affects the income protection premium. A shorter waiting period or longer benefit period results in higher premiums, but also more robust protection.
Things to consider:
- Can you afford to be without income for 30 or 60 days?
- Do you have savings that can help bridge a gap?
- Do you have dependents or loan repayments?
- How long would you need support to get back on your feet?
Use this information when comparing income protection insurance quotes.
Common Exclusions in Income Protection Insurance
While income protection offers comprehensive support, certain exclusions may apply. These typically include:
- Pre-existing medical conditions (if not disclosed)
- Self-inflicted injuries or intentional harm
- Time off due to pregnancy without complications
- Injuries from illegal activities or intoxication
- Work overseas (depending on your policy)
Always review the Product Disclosure Statement (PDS) and seek expert advice to ensure you understand any exclusions.
Related: Financial Services Guide (FSG)
Income Protection for Tradies: A Vital Cover
As a tradie, your ability to work is your greatest asset. Whether you’re on a roof, under a sink, or managing a crew on-site, your income is physically tied to your body’s ability to perform. A back injury, fall, or illness can leave you sidelined for weeks — or longer.
Income protection for tradies includes:
- Monthly income benefits if you’re off work
- Optional business expense insurance
- Coverage for work and non-work-related incidents
It’s your backup plan, especially in industries with higher injury rates.
See also: Plumbers Insurance – meet Victoria’s mandatory cover requirements.
How to Claim Income Protection Insurance
Filing a claim is typically straightforward, but it pays to understand the process:
- Notify your insurer immediately after you’re unable to work
- Submit relevant documents:
- Medical reports
- Tax returns or payslips (to verify income)
- Statement of earnings from your accountant (if self-employed)
- Your waiting period begins.
- Once approved, you start receiving monthly income benefits.
Working with a broker like Atlantic Insurance can simplify this process, especially if you’re recovering and need help handling paperwork.
Frequently Asked Questions
Is income protection insurance tax-deductible?
Yes, premiums are generally tax-deductible if you pay for the policy yourself and it covers lost income. Check with the Australian Taxation Office or your accountant.
Can I have both income protection and life insurance?
Absolutely. They serve different purposes: one helps while you’re alive and recovering, the other helps your family if you pass away.
How much does income protection cost?
It varies based on:
- Your age, health, and occupation
- Your monthly income
- Selected waiting and benefit periods
- Whether you opt for stepped or level premiums
Is Income Protection Worth It?
Absolutely. Think of it this way: if you insure your car, phone, or home, why wouldn’t you insure your income, especially if it supports your entire lifestyle?
Income protection provides a powerful safeguard during life’s toughest moments. Whether you’re a tradie, a consultant, or a creative professional, having the right income protection cover ensures you won’t be left scrambling to pay the bills while trying to recover.
Get Your Income Protection Quote Today
Don’t wait for something to go wrong before you protect what matters most. Our Client Managers at Atlantic Insurance will guide you through:
- Comparing policy features
- Finding the right income protection level
- Understanding exclusions
Get a quote online or speak with an expert to secure your cover today.
Any information contained on this page of the website is general advice only and has been prepared without taking into account your objectives, financial situation or needs. You should consider these, having regard to the appropriateness of this advice and the relevant Product Disclosure Statement (‘PDS’), Target Market Determination (‘TMD’) and Financial Services Guide (‘FSG’), which will be provided following any formal recommendation to you.