One of the most important forms of insurance for subbies is income protection.
As a subcontractor you generally won’t have access to sick leave or worker’s comp, so the only way to properly protect your income is through insurance.
How does it work?
Income protection works by replacing up to 75% of your income for a period of time if you cannot work due to an injury or illness.
To put it simply, the insurance will help you to keep paying the bills and feeding your family whilst you can’t earn a living for yourself.
Your policy will be made up of three main elements being the benefit amount, waiting period and benefit amount.
The benefit amount is the amount of money you will be paid each month whilst you cannot work. Generally this is 75% of your income, but you can reduce this amount if necessary.
The waiting period is the amount of time you must be unable to work for before you can start claiming. For subbies the most common waiting period is 30 days.
Finally we have the benefit period. This is the amount of time you will receive benefits for until you are able to return to work. Subbies can choose from a 2 or 5 year period, or one that runs all the way to age 65.
Why do subbies need it?
Subcontractors in most cases will not have access to sick leave or workers compensation, meaning that you won’t get paid a cent if you can’t turn up each day to the job site.
Unless you have a mountain of savings to fall back on, the only effective way to protect your income is with insurance.
Many work sites have mandatory income protection requirements. Essentially a subbie won’t be allowed onto the work site if they don’t have some form of income insurance is place.
How much does it cost?
It’s impossible to give a figure without knowing all the details, as quotes for income protection can vary wildly depending on a number of factors.
The main factors affecting the cost include your age, occupation and smoking status. Basically if you’re a young non-smoker in a low risk trade you won’t pay too much, but if you’re an old smoker in a high risk trade you could pay a lot.
The only way to get an accurate price on your income is to request a quote. Any competent financial adviser will be able to give you a quote, and there are a number of websites that also provide online quotes now.
Aside from a formal income protection insurance policy there are a couple of alternatives which can also be used.
If you are only worried about injuries and not illness, you can take out an ‘accident only’ policy. This will replace your income in the event of an accidental injury, but not any form of illness.
You can also take out a policy known as ‘sickness and accident’ or ‘injury and illness’. This form of cover is very similar to income protection, however it is generally not as comprehensive.
No matter which option you go with, protecting your income is a must for any subcontractor who cares about their own and their family’s financial wellbeing.