Individuals who are self-employed may find themselves financially at risk without income protection insurance in place. After all, if you are the sole operator of your business, there would be no one to keep things running if you were suddenly unable to work. If the business isn’t operational, what source of income will you have?
An income protection policy will provide you with a steady source of revenue in the event that you are not able to work due to illness or injury. Accidents and illness can happen to anyone at any time. By comparing income protection plans through MultiCover, you can learn about the many options available to you in order to best choose a policy that fits your needs and your budget.
How much can you insure?
Income protection provides self-employed individuals cover for up to 75 percent of the gross distributable income from the business, paid to you or a relative from the net income of the business before tax, including any superannuation contributions to you or the relative. An income protection plan can provide you with an ongoing income in the event that you are unable to work due to illness or injury. There are also many options available within your policy, so it makes sense to choose the options that are relevant to your occupation and lifestyle.
You can also choose between an agreed value policy and an indemnity policy. With an agreed value policy, your proof of income allows you to insure yourself for a set amount of money, which is advantageous because you will know exactly how much you will receive if you are unable to work due to illness or injury, even if your income changes after you purchase the policy. However, an agreed value policy usually costs more than an indemnity policy.
An indemnity policy allows you to insure your income for any declared amount. However, when it comes time to make a claim you will be required to verify your income. The premium on an indemnity policy is usually lower than that of an agreed value policy.
You may also choose between a Stepped Premium and a Level Premium. A Stepped Premium, which is calculated upon each anniversary of your policy at your current age. Stepped premiums are increased each year, and the rate of the increase becomes greater as you age.
A Level Premium, however, is fixed at a flat amount and will only be varied if you make any changes to the general rate levels while you own the policy. During the first few years after you purchase a level premium policy your rates will likely be higher than those of a stepped premium, but the savings over time can be considerable as long as you maintain the policy.
Keep in mind that you will need to consider the waiting period and benefit period of each plan you review when choosing the best option for your needs. Not only will it affect the cost of your income protection premium, it can affect whether you actually receive your benefits when you need them. For example, if you can get by for three months without an income, you can shave about one third of the cost off your premium by agreeing to a 90 day waiting period to receive benefits after filing a claim.
There are so many options for self-employed individuals to consider when choosing the right income protection insurance, it may seem confusing and even overwhelming at first. Go to Multicover.com.au for more information.