How to Take Time Off Work to Recover and Get Paid

A plumber I know of had knee surgery recently and had to take four months off work. Luckily he had income protection, which pays him 75% of his wages whenever he gets sick or injured.

For self-employed tradesmen like plumbers, painters and builders, income insurance is worth looking into, especially if you have a mortgage, or a partner or kids depending on your income.

If you’re considering income insurance, here are nine things you ought to know.

1.    Shop around before you buy. There are at least 13 companies selling income insurance and premiums vary by as much as 50% (hundreds of dollars) depending on:

• Your age, health and any pre-existing medical conditions.
• Your occupation.
• The particular features of the income insurance.

2.    Understand the standard policy features.

• Waiting period. This is the waiting period before your insurance payments kick in. Waiting periods are typically 14, 30, 60 or 90 days. The longer the period the lower the premium. Some people select a longer period if they have money set aside to cover living expenses during that time.
• Benefit period. This is the period over which the policy pays you. Typical benefit periods are ‘2 years’, ‘5 years’, or ‘up to age 65’. The longer the period the higher the premium. Some people select shorter periods to keep their premiums down.
• Increasing claim. This is an important feature that automatically increases your benefit payment in line with inflation.
• Agreed value: If you’re self-employed your income may vary so it’s important to get ‘agreed value’ rather than ‘indemnity value’. Agreed value means you’ll receive an agreed amount at claim time regardless if your income has reduced from the time of the original application. An indemnity policy means the insurer pays 75% of whatever you were earning at claim time.

3.    Don’t get ripped off. A 35 year-old non-smoking tradesman earning $70,000 a year might expect to pay around $85 per month for income insurance with a 30-day waiting period and a 5-year benefit period.

4.    Income insurance premiums are entirely tax deductible, which can save you up to 40% of the total premium each year. If you buy a policy, save your receipts and don’t forget to include in your tax return.

5.    Be careful of over-the-counter insurance policies. These are usually offered by banks or credit card companies and often by mail. They have short application forms only requiring you to tick a box and sign. These policies are on average 45% more expensive.

6.    Does the policy have extra bells and whistles thrown in which increase the premium? These may be nice to have, but are not essential.

7.    Make sure you describe any pre-existing medical conditions you may have such as diabetes or depression, and ask the broker if your condition will affect your premium or your payment at claim time. Some insurers may offer better rates for some conditions.

8.    If you use an insurance broker, make sure they compare policies across at least 10 companies. Some brokers are linked to an insurance company and may favour one product over others. A broad comparison should be provided. Also, you shouldn’t have to pay the broker anything. Like mortgage brokers, insurance brokers earn fees directly from the insurer.

9.    If you already have income insurance but you’re thinking twice about the policy get a free comparison from a reputable broker like lifebroker.com.au. Penalties do not apply for switching policies.