Income protection for the self-employed

When you’re your own boss, everything depends on you: the early mornings, the late nights, the invoices, the clients, the drive that keeps it all running. But what happens if you get sick or injured and can’t work?

That’s where income protection insurance comes in. Unlike employees, you don’t have a HR department or a steady pay cycle backing you up. So having income protection insurance in place means you can keep life and business moving, even when you can’t.

Real Insurance offers flexible income protection built for a range of employment situations, including freelancers, tradies, consultants, and small business owners across Australia. Let’s look at how it works, and why it’s worth considering if you rely on your own two hands for your income.

Can you get income protection insurance if you’re self-employed?

Yes, absolutely. Self-employed people can get income protection insurance; the difference is mostly in how your income is assessed.

To be eligible, you’ll usually need to:

• Be between 18 and 60 years old and a working Australian resident.
• Work a minimum number of hours each week (usually 20 or more).
• Show proof of your earnings, like tax returns or business financials.

Let’s say you’re a freelance photographer earning around $90,000 a year. If you injured your back and couldn’t shoot for three months, income protection insurance could step in, replacing part of your lost income so you can focus on recovery, not bills.

Types of self-employment that can be eligible for income protection insurance

Most people who work for themselves can qualify for income protection insurance, including:

• Freelancers and contractors
• Sole traders
• Consultants and small business owners
• Entrepreneurs and start-up founders
• Gig workers, creatives, and tradespeople

Are there self-employed occupations that can’t be insured?

Some self-employed jobs come with more physical risk, which can make securing income protection insurance trickier or more expensive. That includes people who work in:

• High-risk jobs like roofing, demolition or mining
• Aviation or offshore roles
• Stunt or performance work

If that’s you, it’s worth chatting with your insurer to understand what options you have and what exclusions might apply.

What does income protection insurance cost if you’re self-employed?

There’s no fixed number here. Your premium costs will likely depend on your age, job, income, and how you set up your policy. But as a general guide, income protection insurance usually costs between 1% and 3% of your annual income.

So, if you earn $80,000 a year, you might pay somewhere between $800 and $2,400 annually.

Calculating your cover needs

Your premium is shaped by a few key factors:

• How much you want to be paid out (the benefit amount)
• How long you’re willing to wait before payments start (the waiting period)
• How long you want to receive benefits (the benefit period)
• Plus your age and health, and job duties

It’s worth getting a quote to see how the numbers look for you; even small tweaks can make a big difference. 

How does income protection insurance work for self-employed people?

The big thing to understand is that income protection insurance for self-employed people covers your personal income, not your business’s total revenue.

Let’s say you run a café. If you can’t physically work for a few months but your staff keeps the café open, your payout is based on the income your personal work would have generated, not the café’s total takings.

You’ll generally need to provide recent financials or tax returns to show your average earnings. Once your waiting period passes, you’ll start receiving monthly payments until you can get back to work or your benefit period ends.

It’s about protecting your effort, the part of the business that only you can bring.

What are the benefits of income protection insurance for self-employed individuals?

When you’re self-employed, there’s no sick pay, no HR safety net, and no one to fill in for you. Income protection insurance can give you room to breathe when life throws a curveball.

Here’s why it’s worth considering:

• It keeps the lights on - literally. You can use it to pay bills, rent, or suppliers.
• It covers your personal expenses - from groceries to school fees.
• It helps with healthcare - doctor visits, physio, and medications.
• It protects your cash flow and mental headspace.
• It may even be tax-deductible (be sure to chat to your accountant to make sure you are eligible).

If you want to dig deeper, find out more about income protection insurance here.

Income protection insurance vs business expenses cover

If you’re self-employed, it’s easy to assume income protection insurance and business expenses cover are the same thing; after all, both step in when you can’t work. But they actually protect two very different parts of your financial world.

Income protection insurance is designed to replace your personal earnings, the money that pays for groceries, rent, and everyday living. Business expenses cover, on the other hand, focuses on keeping your business operational while you recover. It helps pay for the costs that don’t stop when you do, like rent, utilities, or staff wages.

Understanding how these two types of cover work (and when you might need both) can make all the difference if you ever have to take time off work unexpectedly. 

If your income and your business are deeply intertwined (say you’re a tradie who employs a few apprentices, or you run a small studio with regular overheads), having both types of cover might be something worth considering.

That way, income protection insurance helps your household stay financially secure, while business expenses cover can help keep your professional life from falling behind while you recover. Together, they give you complete peace of mind: your family, your finances, and your business are all protected.

How to choose the right income protection insurance policy

There’s no single “best” policy, but there’s one that fits you. When comparing insurers, look for:

• Flexibility to tailor benefits and waiting periods.
• A clear definition of what counts as income.
• Transparent exclusions and conditions.
• Reliable claims support.
• A provider you can actually reach when you need them.

Frequently asked questions

Is income protection insurance tax-deductible for the self-employed?

Yes, most self-employed people can claim their income protection insurance premiums as a tax deduction if the policy isn’t through super. Always seek professional advice to be certain you are eligible. Read more: Is income protection insurance tax-deductible?

Can I get income protection insurance through my superannuation if I’m self-employed?

You can, but the cover is usually limited. A direct policy (like one from Real Insurance) offers more flexibility and often faster claims. Read more: Income protection through super vs direct

Is income protection insurance worth it if you’re self-employed?

If your income stops when you stop working, then yes - it’s worth it. It’s the simplest way to protect your livelihood and your lifestyle if something unexpected happens.

Can I get income protection insurance if I’ve just started my business?

Yes, though you’ll likely need to show some evidence of earnings - like invoices, contracts, or forward bookings. The more documentation you have, the easier it is.

Protect what you’ve built with Real Insurance

Being self-employed is freedom - but it’s also full responsibility. If you can’t work, you can’t earn, and that can quickly ripple through everything else in your life.

Income protection insurance gives you a financial buffer, so you can focus on getting better, not stressing about bills. Find out how Real Income Protection Insurance can help keep your finances on track while you take care of yourself.