A Tradie’s Guide to Income Protection in Australia

At a glance:

• Understanding income protection insurance for tradies and its significance in physically demanding professions.
• Income protection insurance safeguards tradies against income loss due to illness, injury, or disability.
• Tailored coverage ensures the right balance between protection and affordability.

 

Income protection insurance is one of the main types of insurance that tradies need. Working on a construction site requires income protection insurance, so it is important to understand how it works and how it can benefit you.

It is often mandatory for tradies to have Income protection insurance before entering a building site, which is not the case with many other professions. As you work in an occupation that has high physical demands on your body, your insurance premiums can be higher than other people’s, too.

 

 

What is Income Protection Insurance for Tradies?

 

Income protection insurance for tradies is a type of insurance designed to provide financial support to tradespeople (tradies) in the event that they are unable to work due to illness, injury, or disability. Tradespeople often have physically demanding jobs that can put them at a higher risk of accidents or injuries that could prevent them from working and earning an income.

Income protection insurance helps mitigate the financial impact of such situations by providing a regular income stream to the insured individual during their period of incapacity. This income can be used to cover essential living expenses, such as bills, rent or mortgage payments, groceries, and other financial obligations, ensuring that tradies and their families are able to maintain their standard of living even if they can’t work.

 

 

Tradies are cognisant of the dangers associated with their work. Thus, Aspect Income Protection insurance is designed to replace up to 85% of your income if you are unable to work due to injury or illness. It covers you irrespective of whether you’re an employee, contractor, or self-employed, regardless of whether you are injured at work or outside of it. It also covers illness, whereas workers’ compensation basically does not.

 

 

Necessity of Income Protection Insurance for Tradies

 

Tradies, with their physically demanding professions, face unique challenges that warrant careful financial planning. Income protection insurance emerges as a crucial safety net for these professionals. This insurance provides indispensable support in times of illness, injury, or disability, offering a portion of their income during incapacitation.

By ensuring continuous financial stability, income protection insurance empowers tradies to cover essential expenses, such as bills, rent, and daily necessities. With customisable waiting periods, benefit periods, and coverage amounts, tradies can tailor policies to their specific needs, guaranteeing a lifeline in casework becomes impossible. In an unpredictable world, income protection insurance stands as an essential tool for tradies to secure their livelihoods and maintain their quality of life during challenging times.

 

Some rigid points on the necessity of income protection insurance for tradies are:

 

Your job requires you to be physically healthy

 

If an office worker breaks their leg playing footy on a Saturday, they probably won’t need to take much, if any, time off work. Tradies can’t get off that easily. Any injury is likely to prevent you from working, and if you go back too early, you risk making your injury worse. Income protection lets you take the time off that you need.

 

Tradies are often ineligible for workers’ compensation.

 

Workers’ compensation is a government program that provides benefits to workers who are injured or become ill on the job. However, tradies are often ineligible for workers’ compensation because they are self-employed or contract workers.

 

Tradies are more likely to be injured or become ill.

 

Tradies are more likely to be injured or become sick than workers in other occupations. This is because they often work in physically demanding jobs and are exposed to hazards such as falls, lifting injuries, and exposure to chemicals.

 

Tradies often have higher income replacement needs

 

Tradies often have higher income replacement needs than workers in other occupations. This is because they typically earn higher salaries and have more dependents.

Which tradies professions are covered by income protection policy?

 

Income protection insurance policies can cover a wide range of tradie’s professions, as well as various other occupations. The specific trades that are covered can vary depending on the insurance provider and the terms of the policy. However, here are some common tradie professions that are often covered by income protection policies:

Construction Workers: This includes carpenters, bricklayers, plumbers, electricians, and other construction-related trades.

• Mechanics
• Truck Drivers
• Painters
• Welders
• Cabinetmakers
• Landscapers
• Roofers
• Plasterers
• Tilers
• Electricians
• Plumbers
• Carpenters
• HVAC Technicians

 

 

How much does Income Protection for Tradies Cost?

 

The cost of income protection insurance for tradies can vary based on several factors, including age, occupation, health, waiting period, benefit period, coverage amount, and the specific insurance provider. These factors collectively determine the premium you’ll need to pay to maintain your coverage.

 

 

Rather than focusing on the cost of income protection insurance, tradies can consider the benefits and utilise them. It may seem expensive to some to get income protection, but imagine if you were uninsured and unable to support your family. Your insurance premium is determined by your age, smoking status, type of work, and more, as with most other related products.

 

Here’s a breakdown of how these factors can impact the cost, along with an illustrative example:

Age: Younger individuals often pay lower premiums because they are generally considered lower risk in terms of health and potential claims.

Occupation: Certain trades might be associated with higher risks of injury or disability, leading to higher premiums. More physically demanding or hazardous occupations might come with increased costs.

Health: Your overall health and medical history can influence the premium. Pre-existing health conditions could lead to higher costs.

Waiting Period: A shorter waiting period (the time before benefits kick in) usually leads to higher premiums, as the insurance starts paying out sooner.

Benefit Period: A longer benefit period (how long benefits are paid) might increase the premium, as it extends the potential duration of claims.

Coverage Amount: Higher coverage amounts will generally result in higher premiums.

Example Scenario:

 

Let’s consider a general scenario where a 30-year-old carpenter (tradie) wants to purchase income protection insurance. They opt for the following policy parameters:

 

Annual Income: $60,000
Waiting Period: 30 days
Benefit Period: 2 years
Coverage Amount: 75% of income ($45,000 annually)

 

For this example, we’ll use hypothetical premium rates:

Age 30 premium rate: $8 per $1,000 of coverage (per year)
Occupation factor: 1.2 (indicating a moderately risky occupation)
Health status: Standard (no extra loading)

 

Premium Calculation:

Premium per $1,000 of coverage = $8
Coverage amount = $45,000
Occupation factor = 1.2
Premium = ($8 * $45) * 1.2 = $540 per year

 

So, the annual premium for the income protection insurance policy for this trade would be $540.

It’s important to note that premium rates can vary significantly based on the insurance provider, their underwriting practices, and the individual’s specific circumstances. To get an accurate premium quote, it’s recommended to reach out to insurance providers and provide detailed information about your age, occupation, health, and coverage preferences. This will allow you to receive personalised quotes that reflect your unique situation.

Things to look at in income protection policy being a tradie.

As a tradie, selecting the right income protection policy requires thoughtful consideration of your profession’s unique demands. Here’s a concise guide on what to look for. Prioritise these factors to secure an income protection policy tailored to your needs as a tradie:

 

Choose a policy that covers all causes of income loss:

 

Some income protection insurance policies only cover income loss that is caused by a work-related injury or illness. Make sure to choose a policy that covers all causes of income loss, including non-work-related injuries and illnesses.

 

Look for a long benefit period

 

Traides may need to be out of work for a long period if they are injured or become ill. Make sure to choose a policy with a long benefit period, such as 24 or 36 months.

 

Short Waiting Periods

 

Given the often hands-on and immediate nature of tradies’ work, waiting for a long period before receiving a payout might not be feasible. Opt for shorter waiting periods so that you can get financial assistance sooner.

 

Choose a policy with a high level of income replacement

 

Tradies need to make sure that they have enough income protection to cover their living expenses and other financial obligations. Choose a policy with a high level of income replacement, such as 85% of your pre-disability income.

 

The exclusions

 

The exclusions are the events that are not covered by the policy. You should carefully review the exclusions to make sure that you are not taking on any unnecessary risk.

 

Tailored Income protection

 

Cover for Partial Disabilities: Not all injuries result in total disability. A tradie might still be able to work, but maybe not at full capacity. A tailored income protection policy can provide partial benefits in such scenarios.

Cover for Seasonal Work: Many tradies might not have consistent work throughout the year. Tailored income protection can account for this, providing cover during off-seasons or downturns in business.

Business Expense Cover: Some tradies run their businesses, and even if they’re unable to work due to injury, the overheads like rent, utilities, and employee salaries continue. A specialised policy might offer to cover these fixed business expenses for a certain period.

Selecting the right income protection policy for tradies hinges on aligning coverage with both job-specific risks and individual requirements. Doing so directly influences the premiums and overall suitability of the policy.

 

Are tradies’ insurance and income protection the same?

 

Tradies insurance is a broad term that encompasses various types of insurance coverage specifically designed for tradespeople. This can include several types of insurance policies tailored to the risks and needs of different trades, such as builders, plumbers, electricians, and other skilled workers.

Income protection for tradies, on the other hand, is a specific type of insurance that focuses on providing a financial safety net if a tradie is unable to work due to illness, injury, or disability. This type of insurance is designed to replace a portion of the tradie’s income during their incapacitation, ensuring they can continue to cover essential living expenses while recovering.

Income protection insurance for tradies is more centred on the tradie’s financial well-being when they can’t work, whereas “tradies insurance” typically encompasses a wider range of coverage related to the various aspects of their trade and business activities.

For tradies, income protection insurance is not just a luxury but a necessity, given the physical demands and inherent risks of their professions. This guide sheds light on the critical aspects of income protection for tradies, illuminating how this insurance provides a lifeline in times of injury, illness, or disability.

While the costs may vary based on factors like age, occupation, and coverage, the benefits of having income protection are immeasurable.

With tailored policies that address job-specific challenges and personal requirements, tradies can secure their financial well-being, ensuring that even during periods of incapacity, they can provide for themselves and their families. Whether it’s covering bills, mortgages, or everyday expenses, income protection insurance empowers tradies to face uncertainties with confidence.

In a world where work-related setbacks can be unexpected and financially daunting, income protection insurance stands as a steadfast support system, safeguarding the livelihoods and futures of those who play such a vital role in building our world.

So, for tradies, considering income protection insurance isn’t just a choice – it’s a proactive step towards securing their present and their aspirations.

It is vital for tradies to have income protection insurance, not only to protect themselves in case of injury or illness but also to provide financial security for their families. When searching for income protection insurance, it is a good idea to obtain a few quotes first.

Any financial adviser can provide quotes, but most tradies agree that it’s best to find one who specialises in tradesman’s insurance. Aspect Underwriting is a trusted service provider to help you succeed in business.