If you would struggle to pay bills after a month or two without work, income protection deserves serious consideration. As a sole trader you generally have no employer sick leave or workers compensation. Policies replace a portion of your income (commonly capped around 70% after recent APRA reforms) after a waiting period, and premiums held outside super are generally tax-deductible.
What it depends on
The full answer depends on your specific circumstances. Here’s what matters.
Your savings buffer
The waiting period (often 30, 60 or 90 days) is the gap you must fund yourself. A larger emergency fund lets you choose a longer waiting period and a cheaper premium.
How your income is assessed
Insurers usually base benefits on your recent taxable business income. If you minimise taxable income aggressively, your insured benefit may be lower than you expect — check the definition of income before you apply.
Inside or outside super
Cover through super can be cheaper on cash flow but may have narrower definitions and shorter benefit periods. Cover held personally is generally tax-deductible and often more flexible.
The last 10%
What a qualified professional can add
The answer above covers the general position. Here’s where professional judgement — applied to YOUR specific situation — makes the difference.
- Comparing policy definitions — own occupation, benefit period, offsets — across insurers
- Structuring cover between super and personal ownership to balance cost and quality
- Handling the underwriting and disclosure process so claims are not later disputed
Questions to ask before you engage one
If you decide to engage a professional, these questions help you evaluate whether they’re right for your situation.
How will my income be calculated at claim time, and what if it fluctuates?
What benefit period and waiting period are you recommending, and why?
Are premiums stepped or level, and what will they cost at 50 and 60?
How are you paid for arranging this policy?
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General Advice Warning
The information on this page is general in nature and does not take into account your personal objectives, financial situation or needs. It is provided by Global Mutual Funds Pty Ltd (ABN 20 090 555 436, AFSL 222640) and should not be relied upon as a substitute for professional advice. Consider whether the information is appropriate before acting on it. Read our Financial Services Guide.