Income Protection for the Self-Employed: How to Safeguard Your Business and Lifestyle
Running your own business comes with freedom — but also risk. When you’re self-employed, you are the business. If illness or injury stops you from working, there’s no sick leave, no annual leave, and no employer to fall back on.
That’s why Income Protection Insurance is so critical for self-employed Australians. It provides a monthly benefit (typically up to 70% of your pre-tax income) if you’re unable to work temporarily due to illness or injury.
At Covered Life, we help self-employed professionals, sole traders, and small business owners protect their income — and their lifestyle — from the unexpected.
Why Self-Employed Workers Need Income Protection
As a business owner, your income depends on your ability to work. If something happens to you, it doesn’t just affect your household — it affects your clients, cash flow, and future growth.
Income protection insurance acts like a financial safety net. It ensures you can still:
Pay rent or the mortgage
Keep up with household bills
Fund business expenses
Support your family
Focus on recovery without financial stress
According to the Australian Institute of Health and Welfare (AIHW), over 1 in 5 working-age Australians experience a long-term health condition that limits their ability to work. For self-employed people, that impact can be devastating without cover.
How Income Protection Works
If you’re unable to work due to injury or illness, your policy pays a monthly benefit after a waiting period (such as 14, 30, or 90 days).
The payments continue until you recover or reach your chosen benefit period (2 years, 5 years, or up to age 65). You can use the money however you need — from keeping your business running to maintaining your home life.
Tax Benefits for the Self-Employed
Income protection premiums paid personally (outside of superannuation) are generally tax-deductible. This can make it one of the most cost-effective forms of insurance for business owners.
Always speak to your accountant or adviser to confirm how the deduction applies to your circumstances.
Choosing the Right Cover
When you’re self-employed, flexibility is key. Consider policies that allow:
Agreed value cover: Benefits are based on your verified income at application time.
Indemnity cover: Benefits are based on income at claim time — usually cheaper, but less predictable.
Optional extras: Such as business expenses insurance, rehabilitation support, and inflation-linked benefits.
A Covered Life adviser can help you compare options and choose the right fit for your business.
Why Work with Covered Life
We understand the self-employed hustle. Our team helps you:
Compare Australia’s leading insurers
Understand tax-effective policy options
Get flexible cover that matches your income patterns
Handle paperwork and claims efficiently
We make it simple for business owners to stay protected — without disrupting their workday.
General advice disclaimer: This article contains general information only and does not consider your individual circumstances. You should seek professional advice before acting on any information provided.
