- Posted 16 May
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As a self-employed person, it can seem like it’s just one thing after another when it comes to checks and balances you need to have in place to ensure that your business continues to function.
And sometimes, because of this, you can sometimes miss important things, like protecting your income.
Workers Compensation Insurance
A lot of the time, the reason why self-employed people miss income protection or don’t think about it is that they believe they are covered under workers compensation insurance.
Unfortunately, to be covered by workers compensation insurance, you need to hold a contract of employment with a company. As a self-employed person, you don’t meet these criteria.
It’s also important to note, that as a self-employed person, you also don’t have access to sick leave, holiday leave or maternity leave. So if you need to take any of these, any funds need to come out of your own pocket.
Income Protection Benefits
By taking out income protection, you’ll ensure that you remain financially secure in the event that you’re forced to take a leave of absence from working due to a serious illness or injury. Income protection offers an ongoing monthly benefit of 75% of your income.
You have a couple of options when it comes to choosing the type of policy you have. There is an agreed value policy and an indemnity value policy. These are outlined below:
- Agreed Value Policy – your income is agreed upon at the time of your application for this policy. This means that should you need to make a claim, you don’t have to prove your income. The monthly benefit amounts will already have been proven and you’re claim will be easier to process. The amount does not change even if there are fluctuations in your income, so it’s important to agree on a value that is realistic.
- Indemnity Value Policy – your income needs to be proven at the time you claim. Most insurance companies will review your income over the past three years and choose a 12-month period where you received the most income and pay 75% of that.
Covering Business Expenses
In addition to income protection, as a self-employed person, you’ll no doubt have business expenses. Income protection policies do not cover business expenses, however, you can choose to add business expenses cover to your income protection plan.
Business expenses cover provides cover for a specified period (normally 12 months) and covers fixed expenses only. This cover means that your business can remain running while you get yourself healthy again.
The types of expenses that can be covered include:
- Office rent
- Staff salaries
- Vehicle leases
- Telephone bills
- Bank charges
- Equipment leasing
- Utility bills
- Cost of hiring someone to run your business while you recover
- Plus much more
Income protection and business expenses insurance is a great asset to a self-employed person. It ensures that should anything happen, you and your business are taken care of.
If you’d like some more information about how this could work for you, contact us here at Australian Credit and Finance. Our experienced team can walk you through the benefits for your specific situation.