✅ Updated 2026

If you break your wrist tomorrow, how long could you survive without income? As a self-employed tradie, there's no sick leave, no employer, no safety net. Income protection insurance replaces 70–75% of your income if you can't work due to illness or injury. Here's everything you need to know.

📋 In This Article

  1. →What is income protection insurance?
  2. →Why tradies especially need it
  3. →What does it cost?
  4. →Waiting periods explained
  5. →Benefit periods explained
  6. →Is it tax deductible?
  7. →Where to get it
  8. →FAQs

What is Income Protection Insurance?

Income protection insurance pays you a monthly benefit — typically 70–75% of your pre-disability income — if you're unable to work due to illness or injury. It's not the same as workers compensation (which only covers work-related injuries) — it covers any illness or injury, whether it happens at work, at home or anywhere else.

Example: you're an electrician earning $120,000/year and you tear your ACL playing sport. You're off work for 4 months. Income protection pays you approximately $7,000/month (70% of $10,000/month) after your waiting period — so you can pay your mortgage and bills while you recover.

Why Self-Employed Tradies Especially Need It

Employees have paid sick leave as a safety net. Self-employed tradies have nothing. Every day you can't work is a day you don't earn. Consider:

  • Physical trades have higher injury risk than office jobs — falls, cuts, strains, and repetitive stress injuries are common
  • No employer sick pay — your income stops the day you can't work
  • Business overhead continues — loan repayments, insurance, vehicle costs keep going whether you're working or not
  • Recovery takes longer — physical jobs are harder to return to part-time than desk jobs

Reality check: The average income protection claim in Australia lasts 4–6 months. One extended injury or illness without cover can wipe out years of savings.

What Does Income Protection Cost?

Income protection premiums vary significantly based on your age, trade, income, waiting period and benefit period. Rough 2026 estimates for a 35-year-old male tradie insuring $80,000/year:

Waiting PeriodBenefit PeriodApprox. Monthly Premium
14 days2 years$120–$180/month
30 days2 years$80–$130/month
30 days5 years$100–$160/month
90 days2 years$50–$90/month

These are approximations — your actual premium depends on your specific trade, health history and the insurer. Female tradies often pay less. Older tradies pay more. Agreed value policies (where the benefit is fixed at the insured amount regardless of what you earn at claim time) are more expensive than indemnity policies but offer more certainty.

Waiting Periods — How to Choose

The waiting period is how long you wait after becoming disabled before payments start. Longer waiting period = lower premium.

14-day wait: Payments start almost immediately. Most expensive. Worth it if you have no savings buffer.

30-day wait: The sweet spot for most tradies. You cover the first month from savings, then the policy kicks in. Significantly cheaper than 14-day.

90-day wait: Cheapest option. Only suitable if you have 3+ months of living expenses in savings that you'd be comfortable using.

Benefit Periods — 2 Years vs To Age 65

The benefit period is how long payments continue while you're unable to work.

2-year benefit period: Covers the majority of claims (most people return to work within 2 years). Significantly cheaper than longer periods.

5-year benefit period: Good middle ground — covers serious injuries that require extended recovery.

To age 65: Most comprehensive — if you become permanently disabled and can never work in your trade again, you receive payments until retirement age. Most expensive, but provides the strongest protection.

For most tradies, a 30-day wait with a 2–5 year benefit period is the practical choice that balances protection and cost.

Is Income Protection Tax Deductible?

Yes — premiums for income protection insurance are generally tax deductible as a business expense for the portion that covers lost income. This makes the effective cost significantly lower than the premium: a $100/month premium at a 32.5% marginal rate effectively costs about $67.50/month after tax.

Note: there are specific rules around deductibility depending on how the policy is structured and whether it's inside or outside superannuation. Confirm with your accountant for your specific situation.

Where to Get Income Protection for Tradies

Options for getting income protection as a self-employed tradie:

  • Through your super fund — many super funds offer group income protection at competitive rates. Check if AustralianSuper or your current fund offers it. Premiums come from your super balance.
  • Direct from an insurer — TAL, AIA, MLC, OnePath and others offer retail income protection policies. You own the policy directly.
  • Through a broker or financial adviser — they compare options from multiple insurers and help you structure the right policy for your situation.
  • Through BizCover — BizCover offers some income protection options for self-employed tradies alongside public liability.

Can I get income protection with a pre-existing condition?

It depends on the condition. Most insurers will exclude the pre-existing condition from cover rather than refusing the policy entirely. This means you're covered for everything except claims related to that condition. Always disclose pre-existing conditions fully — failure to disclose can void a claim.

What's the difference between income protection and total and permanent disability insurance?

Income protection pays a monthly benefit while you're temporarily unable to work — you return to work and the payments stop. Total and permanent disability (TPD) insurance pays a lump sum if you become permanently and totally disabled and can never work again. Many tradies have both.

Is income protection inside or outside super better?

Both have pros and cons. Inside super: premiums come from your super balance (less cash flow impact), but the benefit is paid to the fund first, tax may apply, and you can only access it when you meet a condition of release. Outside super: more straightforward claims process, benefit paid directly to you, premiums paid from after-tax income but are tax deductible. Most advisers recommend outside super for better protection.

## How Much Income Protection Cover Do You Actually Need? Working out the right level of cover is where most tradies get unstuck. You can't just pick a number and hope it works—you need to know your actual monthly expenses and lost income. Start by calculating your genuine monthly outgoings. This isn't what you think you spend; it's what you actually spend. Pull up your bank statements from the last three months and add up: - Rent or mortgage payments - Vehicle expenses (fuel, maintenance, insurance) - Tools and equipment maintenance - Phone and internet - Food and household expenses - Superannuation contributions (you're still responsible for your 11.5% super guarantee) - Tax instalments (this is crucial—if you're on PAYG tax instalments, ATO doesn't stop chasing you when you're injured) - Insurance premiums (public liability, tools, vehicle) Most tradies underestimate this figure by 20-30%. Use accounting software like Xero or Tradify to pull accurate figures—don't guess. Next, work backwards from your income. If you earn $75,000 annually, that's roughly $6,250 monthly gross. But you only need to replace the portion that covers essential expenses. If your actual monthly needs are $4,200, insuring for $4,000-4,500 makes sense. You don't need to insure your entire income; that's wasteful and expensive. Here's the practical approach: add up your genuine monthly expenses, then subtract any income that continues when you can't work (rental income, investment dividends, spousal income). The gap is what you need to cover. **Critical consideration:** income protection won't cover 100% of your income anyway. Most policies pay 60-70% of your usual earnings. So if you're earning $100,000 annually and claim, you'll receive roughly $3,500-4,100 per month, not the full $8,333. ## Claim Waiting Periods: The Hidden Cost That Matters The waiting period (also called the elimination period) is how long you must be unable to work before the insurance starts paying. This is where tradies make expensive mistakes. Common waiting periods are 14 days, 30 days, 60 days, or 90 days. The longer you wait, the cheaper the monthly premium. Here's the critical bit: most tradie injuries resolve within 4-6 weeks. Choose a 90-day waiting period, and you're self-insuring through the most common injury timeframe. **14-day waiting period:** - Premium: ~$80-120/month - Best for: Tradies with emergency savings under $3,000 - Reality: Most claims fall here; you'll actually use this cover **30-day waiting period:** - Premium: ~$60-90/month - Best for: Tradies with $3,000-5,000 emergency buffer - Reality: Reasonable middle ground for most **60-day waiting period:** - Premium: ~$45-70/month - Best for: Tradies with solid savings ($6,000+) - Reality: Covers the gap between short-term and long-term injury **90-day waiting period:** - Premium: ~$30-50/month - Best for: Tradies who've got 3 months living expenses saved - Reality: Only covers serious, extended injuries The maths: if you save $50/month by choosing 90 days instead of 14 days, that's $600 per year. But a 30-day ankle fracture costs you nothing with 14-day cover and costs you $4,000+ out of pocket with 90-day cover. Most tradies should sit at 14-30 days.

TIP: Your waiting period choice should match your emergency fund, not your budget. If you don't have 90 days of expenses saved, don't choose a 90-day waiting period. You'll skip the claim or go into debt.

## Income Protection Insurance Comparison: Key Features to Evaluate When comparing policies, don't just look at price. Most cheap policies are cheap because they don't pay claims. Here's what actually matters: | **Feature** | **Budget Policies** | **Mid-Range Policies** | **Premium Policies** | |---|---|---|---| | **Monthly cost (Age 35, $4k benefit)** | $25-40 | $50-75 | $85-120 | | **Definition of "unable to work"** | Own occupation (restrictive) | Own occupation | Own occupation + part-time work allowed | | **Waiting period options** | Usually 90 days only | 14/30/60/90 days | 14/30/60/90 days | | **Maximum benefit period** | 2 years | 5-10 years | To age 65 | | **Partial disability coverage** | No | Sometimes | Yes | | **Indexation (keeps up with inflation)** | No | Yes (3-4% annually) | Yes (4-5% annually) | | **Underwriting speed** | 2-3 weeks | 5-7 days | Next-day approval possible | | **Claims acceptance rate** | ~55-60% | ~70-75% | ~78-82% | The claims acceptance rate is critical. Budget insurers reject claims regularly because their definitions of "unable to work" are strict. You could be genuinely unable to work as an electrician, but if you *could theoretically* work as a desk job, some insurers will reject your claim. For tradies, look for policies that use an "own occupation" definition throughout the benefit period. This means if you can't do your specific trade, you get paid—even if you could do other work. Use BizCover to compare multiple policies side-by-side. They'll show you the actual definitions and terms, not just the price. ## Frequently Asked Questions

Can I claim income protection if I work part-time or have variable income?

Yes, but it's more complicated. Insurers will average your income over the previous 2-3 years to establish your benefit amount. If you've just started trading or had a significant income drop, you'll be insured for a lower amount. This is why keeping accurate records with software like Xero is essential—insurers will request 2-3 years of tax returns and business accounts. If you're growing rapidly, your policy might underinsure you. Review your coverage annually and increase it as your income rises.

What injuries or illnesses are typically NOT covered?

Most policies exclude injuries from illegal activities, self-harm, drug/alcohol impairment, and pregnancy (unless complications develop). Many also exclude pre-existing conditions—if you had a bad back before applying, a back injury might not be covered. Psychological conditions sometimes have specific waiting periods (60-90 days before they start paying). Always read the Product Disclosure Statement carefully and declare any health issues during application; non-disclosure voids your policy when you claim.

Do I need both income protection and trauma/critical illness insurance?

They serve different purposes. Income protection covers ongoing lost income during recovery. Trauma insurance pays a lump sum if you suffer a specific illness or injury (heart attack, cancer, loss of limb). For tradies, income protection is the priority—it covers your mortgage and bills during recovery. Trauma insurance is secondary; it helps with medical costs or rehabilitation. If budget-constrained, get income protection first. As your business grows, add trauma coverage.