Income Protection for Tradies

If you’re a tradie, it’s probably no surprise to you that working in your industry comes with increased risks. For a start, you’re more likely to deal with injuries and illness than people in a lot of other professions. 

On top of that, earning an income usually relies on you being fit and healthy.

Fortunately income protection insurance (a type of life insurance) can keep the cash flowing if something happens to you at work or elsewhere and you need time off.

It typically pays around 70% or more of your usual monthly income while you’re recovering. 

This guide covers the basics of income protection for tradies.

What are the special risks faced by tradies?

Whether you’re a builder, electrician, plumber, carpenter or any other type of tradie, the reality is your job comes with more risks than most other professions.

This includes an increased chance of falls, vehicle/equipment accidents and exposure to dangerous materials – just to name a few.

The stats back this up: according to Safe Work Australia^, 27.5% of all serious compensation claims made in 2021-2022 were by labourers, while 15.8% were made by technicians and trades workers. 

Workers who made a serious compensation claim were out of work for an average of seven weeks. That’s nearly two months of not being able to earn an income.

Now this might all sound a bit doom and gloom. But it’s worth knowing the facts so you can start thinking about what you would do if you were hit by injury or illness and couldn’t work.

Why might tradies need income protection?

The bottom line is tradies are more likely to need time off work due to injury or illness than a lot of other people. Not only that, but your livelihood depends on being able to do your job.

So, the obvious reason why you might want income protection is to make sure you can still pay the bills and living expenses if you’re too injured or ill to work.

Another big reason is that you could be required to have income protection insurance for jobs on certain work sites – particularly if you’re self-employed or a subcontractor.

What’s more, income protection can be especially beneficial if you’re self-employed or a subcontractor because you might not get paid sick leave or be covered by workers’ compensation. 

In other words, income protection could be your only lifeline if you weren’t able to earn an income.

How is income protection different from workers’ compensation?

Although income protection and workers’ compensation are similar in some ways, there are some big differences too.

Workers’ compensation is a type of insurance designed to pay a benefit to employees if they’re injured on the job. Most employers in Australia are required to have workers’ compensation insurance and they pay the premium to the government.

Income protection insurance is paid for by individual policyholders and covers you if you can’t work due to illness or injury, whether something happens to you at work or elsewhere. 

For example, if you tear your ACL while running and need time off work, income protection could pay you a monthly income while you recover, while workers’ compensation wouldn’t. 

If you’re self-employed or a subcontractor, you might not be eligible for workers’ compensation, but you can get protected through income protection insurance. 

Even if you are eligible for workers’ compensation, it often only lasts a limited time and won't necessarily be enough to cover your bills. Income protection could cover you in more situations and provide additional benefit payments.

How much does income protection for tradies cost?

The cost of income protection insurance can vary depending on your age, gender, smoking status and occupation. 

To give you a rough idea of how much you might pay, below is an overview of average monthly premiums for tradies with different levels of cover.

If you work in a trade, you could be looking at a higher-than-average premium because your job is considered high risk.

Comparing income protection from multiple insurers can help you find a policy that offers the best value for money for your situation.

What should tradies look for in income protection insurance?

There are a few things to keep an eye out for if you’re looking into income protection insurance:

• The waiting period: Income protection policies usually have a "waiting period", which is the length of time you have to wait before you can make a claim. If you have some annual leave or sick days up your sleeve or savings you can rely on, you might choose a longer waiting period, which generally lowers your premium. 

• Rehabilitation expenses coverage: Some insurers will pay for the cost of rehabilitation on top of your monthly payment, if you need it for your recovery.

• Benefit indexation: This means your monthly benefit will increase each year to match inflation.

• Specified injury benefit: With this feature, you can skip the waiting period if you suffer an injury listed in your policy. 

This can be helpful if your work puts you at risk of a specific injury, like severe burns (a bit gruesome, but you get the picture).

Are income protection insurance premiums tax-deductible?

Yes, the premiums you pay for income protection insurance are generally 100% tax-deductible.

That said, it’s always worth checking in with your tax specialist or accountant to confirm if this will apply to you.

What other life insurance options are there for tradies?

Income protection is just one type of life insurance that can be useful if you work in a trade. The other main types are:

• Trauma insurance, which pays out a lump sum if you can’t work due to a serious injury or illness like cancer, heart attack, stroke, major burns or a condition that puts you in intensive care.

• Total and permanent disability (TPD) insurance, which pays a lump sum if you become disabled due to an illness or injury and can’t work ever again.

• Term life insurance, which pays a nominated person a lump sum if you die or develop a terminal illness.

Is it worth getting income protection?

While it depends on your situation, income protection could definitely be beneficial if you rely on being fit and well to earn an income and would struggle financially otherwise.

Certain risks are just part of life as a tradie, but worrying about what you’d do if you couldn’t work doesn’t have to be.

Whether you’re single or supporting a partner or kids, income protection can help you sleep better knowing you’ll be able to cover the bills and living expenses if something were to happen to you.

Whatever your situation looks like, comparing your options is the best way to find a deal that’s right for you.

It’s why we built our comparison tool, which lets you compare income protection cover and prices from a panel of insurers. 

You’ll also get support from one of our insurance specialists, who know the ins and outs of income protection and can make sure there’s no hidden surprises, restrictions or exclusions when you buy a policy.

Start comparing policies now by clicking the button below.

Sources

^Safe Work Australia, Australian workers’ compensation statistics 2021-22, released 28th September 2023.

Matthew Lang is the general manager of life insurance at Compare Club. Matthew leads a team of dedicated professionals who are passionate about helping individuals and families make informed decisions about their life insurance needs. Whether it's finding the right coverage for your specific circumstances, comparing policies, or optimizing your existing policy, Matthew and his team are here to provide expert guidance and support.

Meet our life insurance expert, Matthew Lang

Matthew's top life insurance tips

• 1

  Identify what you want out of life insurance before you buy. Knowing the purpose of your life cover will help you choose a policy that meets your needs.

• 2

  It's easy to assume that the sole purpose of life cover is to leave money behind for your family, but there's more to it than that.

• 3

  Life insurers like those on our panel pay an average of 97% of claims in full.

• 4

  There are different types of life insurance, including term life insurance, income protection, trauma cover and total and permanent disability cover.