How Income Protection Insurance Works for Employees Vs Freelancers

For protection during those unexpected circumstances that turn your life upside down, Income Protection Insurance comes in to offer you stability and time to recover. With that in mind, Income Protection Insurance looks different for everyone. If you’re a freelancer or self-employed, you may be thinking, How does Income Protection Insurance work for me?

The truth is, you are looking at some differences from traditional employees. But don’t let that stop you there. Understanding what Income Protection Insurance looks like for you, what you’re eligible for, and how it can protect you if the worst happens is crucial to safeguarding your livelihood and planning for the future.

How does Income Protection Insurance work?

Income Protection Insurance is your back-up plan when you can’t work due to an illness or injury. It typically covers around 70-90% of your regular income to offer you peace of mind when you’re recovering and financially support you to cover essentials such as rent, groceries and utility bills through payouts once you make a claim.

When you’re considering your Income Protection Insurance, factors that affect the cost and the cover include: Waiting Periods, your age, your medical history, your job, Benefit Periods and your lifestyle. Insurers will consider these factors collectively to determine your likelihood of needing to claim on your cover. 

You’ll want to consider the amount you need to survive in the event of an illness or injury to ensure you are sufficiently covered. This includes considering the Waiting Period and Benefit Period to determine how self-sufficient you can afford to be before your Income Protection Insurance steps in and how quickly you’ll be back on your feet.

Luckily, you don’t need to figure this out alone. With Morgan Insurance Brokers, we’ll support and guide you in choosing a tailored policy that meets your needs. Our team of experts offer professional and reliable advice to ensure that you’re clear on the terms of your policy. Give us a call on 1300109778.

What if I’m self-employed?

In the world of the self-employed or those in Freelance work, Income Protection Insurance can be more important than ever. Traditional employees are usually protected by sick leave, annual leave and general workers’ insurance. However, Freelancers and self-employed individuals do not have access to this form of support. But how do insurers assess self-employed individuals to determine the terms of their Income Protection Insurance? Let’s take a look at how it’s different for you.

• Income Assessment: As Freelancers do not have standard salaries that insurers can refer to, they will assess income based on business earnings. Business expenses will be subtracted from this amount, and then the average across the prior 12 months will be calculated. 
• Cover Eligibility: To be eligible for Income Protection Insurance that reflects your needs, you will need to provide consistent evidence of working hours and income. 
• Proactive Approach: Some employers offer indirect Income Protection through superannuation contributions, which can be a form of protection you can access through your super fund options. However, freelancers and the self-employed need to independently engage with insurance brokers to access Income Protection Insurance that will cover them.
• Cover Cost: As insurers will consider occupation risks and income irregularity, freelancers may face higher costs when choosing their Income Protection Insurance cover, as consistent pay may be hard to prove. However, base calculations, including age and health, will be similar for both self-employed individuals and traditional employees.

So, obtaining Income Protection Insurance as a traditional employee may be more cost-effective due to evidence of regular cash flow. Generally, the terms of Income Protection Insurance will be assessed similarly to traditional employees across the individual factors. However, for freelancers, income assessment will look different as supporting evidence will be required. Traditional employees also have access to other support systems that are not available for freelancers. Thus, Freelancers have a greater need for Income Protection Insurance. 

Morgan Insurance Brokers For You

The most important element to making a smart choice with your insurance is having a broker who listens to your needs and is by your side. With Morgan Insurance Brokers, that’s exactly what you can expect. You don’t have to have it all figured out; that’s what we’re there for. 

We give you expert advice to help you choose the right policy. Contact us today for more information.