Income protection for business owners and the self-employed

An employee who is off work sick has sick leave, and often a default insurance policy through their super fund. A business owner has neither — and the business usually needs them most at exactly the time they can’t work.

How income protection works

If illness or injury prevents you from working, the policy pays a monthly benefit — typically up to 70% of your pre-disability income — after a waiting period, for a defined benefit period.

• Waiting period: how long you wait before payments start. Longer waiting periods mean lower premiums.
• Benefit period: how long payments continue. Common options are two years, five years or to age 65.
• Definition of disability: how the insurer decides you can’t work — in your own occupation, or any occupation.

The self-employed problem

Policies sold since 2021 generally insure income on an indemnity basis, measured over a period before the claim. For a business owner, “income” can mean very different things: salary paid to you, profit in the business, or distributions from a trust. If the insurer’s definition doesn’t match how you actually receive income, the benefit can be far lower than expected.

Business expenses insurance

Separate cover pays fixed business costs such as rent, staff wages and loan repayments while you are unable to work, so there is still a business to return to.

Inside or outside super?

Holding cover inside super can ease cash flow, but definitions and benefit periods may be more limited. Holding it personally usually offers broader cover, with premiums that are generally tax-deductible. Many owners use a combination.

Review it when anything changes

A new loan, a new business, a change in how you pay yourself, or a new child are all reasons to review cover. We size cover against your actual debts and income, alongside the firm’s view of your lending and tax position.

Common questions