Insurance. Yet another expense tradies worry about.
As a tradesperson, you are advised to have a range of tradie insurance policies in place, including public liability insurance, auto and tool insurance, business insurance, and others.
What you may not realize is that many tradespeople must have income protection insurance in place in order to work on certain construction projects!
What is income protection insurance
Have you ever considered what would occur to your company and family if you were unexpectedly out of work for a while, or even permanently? How many weeks could you make it without receiving any money?
You most likely own your own trade business or work as a subcontractor; therefore, you probably don’t have access to paid time off for illness or injury. When you get ill or injured and are unable to work, income protection insurance pays monthly payments equal to up to 75% of your salary. Furthermore, coverage is availableup until the age of 65.
But I have worker’s compensation insurance. Is that not enough?
If you work as an employee, worker’s compensation will cover any workplace injuries. Payouts, however, may only be made for a short period of time and may not entirely cover your revenue. What will happen if you experience an accident outside of work?
Weekend sports games with friends present many opportunities for injury, as do domestic accidents. What if you develop a major illness and are out of commission for a while? Both work-related and non-work-related major illnesses and injuries are covered by income protection insurance.
How much does income protection insurance cost?
The amount of coverage, your age, whether you smoke, and your line of work all play a role in how much insurance you need. A trade job is associated with a greater likelihood of work-related injuries, so you can anticipate paying higher rates than in other professions.
Can you afford to not have income protection in case the unexpected occurs, given that your line of work does have a higher chance of injury?
Your degree of coverage and expenses will be influenced by three primary variables:
- Benefit Amount: The sum you will start receiving each month after filing a claim. Your benefit can only cover up to 75% of your pre-tax income. Your premium can be decreased if you can make do with a lower benefit amount.
- Benefit Period: The time frame during which benefits will be paid once you submit a claim. Typically, benefit periods last for two years, five years, or until age 65. You will pay a greater premium if you select a longer benefit period.
- Waiting Period: The amount of time you must go without pay before receiving benefits. The majority of policies have a 30-day waiting period, which means you must be unable to work for 30 days in order to be eligible for payments. A longer waiting period might result in a lesser premium.
Insurance brokers
Find a specialized tradesman insurance broker rather than wading through complex legalese on your own. Insurance brokers have extensive knowledge of the trade sector and will locate the ideal coverage for you at the most reasonable cost. Additionally, income protection insurance premiums are completely tax deductible, which is advantageous during tax season.
Insurance for personal injuries and illnesses is less expensive. That’s the same as income protection, right?
Personal accident and sickness insurance works similarly to income protection by offering cash support if you become very ill or injured and are unable to work. However, if there are changes to your health, employment, or way of life, the insurer may choose not to renew the policy.
As long as you keep paying your premiums, the insurer cannot refuse to renew your income protection insurance. Personal accident and sickness insurance has more policy restrictions, such as injuries sustained while participating in high-risk activities or sports, and benefit periods are restricted to 2 to 5 years.
What additional features should I search for in income protection insurance?
When purchasing insurance, be wary of policies that don’t need a medical exam because the insurance provider may review your medical history when you file a claim and may choose to exclude coverage for pre-existing conditions. To determine whether any pre-existing medical issues are covered (or excluded) before enrolling, it is advisable to choose a policy with completely medically underwritten coverage.
Look for a policy with an accident cover option if you believe you won’t be able to wait the required waiting period before payments start. If you have an accident, payments will still be made to you immediately.