Small Or Medium Business Owner – How Do I Know What Level Of Income Protection Suits Me Best


It’s not uncommon for large businesses to have business insurance to protect their business and income protection insurance to protect their employees. However, when it comes to a small or medium sized business, the owners or managers often don’t consider taking out income protection insurance for their own incomes.

Maintaining a steady cash flow is a key to success for every business and for small to medium sized businesses, cash flow is even more critical. There are many benefits of being a business owner, but the chance that you could get injured or fall ill and become unable to work is often overlooked. An event like this could easily send your cash flow down the drain.

So, have you ever thought about what would happen if you become ill or injured and are unable to work? How will you handle all day-to-day and business expenses?


“Failure to maintain and control business expenses can impact business success, and this is when income protection insurance can become very helpful.”


Failure to maintain and control business expenses can impact business success and this is when income protection insurance can become very helpful.

Income protection insurance can cover up to 85% of your income for a certain period when you are unable to work due to injury or illness. You will keep receiving up to 85% of your salary each month which can help you to cover your medical bills and expenses. You can also use this amount to maintain the cash flow in your business.


What Level Of Income Protection To Take?

The amount of insurance cover that you need depends on various factors like your day-to-day expenses, level of risk in work, loans, etc. You will need to consider all factors and calculate how much cover you will need to cover your expenses while you cannot work.

Once you know the amount you need, it’s time to find a policy. The premium on your income protection insurance can differ depending on the amount of cover, waiting period, and benefit period.


Amount of Cover

Usually, income protection insurance covers up to 75% of your income but some insurers, like Aspect Underwriting, offer cover up to 85%. Depending on your needs, you can select the percentage or a set maximum benefit. As the cost of the premium is directly proportional to the amount of cover you get, you get to choose the cover amount.

It is important to note here that whatever income you choose must be justified/supported, the most regular source of justification is your tax return. You cannot insure an income greater than the one you actually receive.


It is always best to protect your business, no matter how small, in the case that you suffer from an injury or illness. Credit: Unsplash


Choosing Waiting Period

A waiting period is the time you need to wait to receive a benefit from your insurance policy, once your medical report states that you are unable to work. The waiting period can differ as per the policy; usually it’s 14, 30, 60 or 90 days. And a longer waiting period means a cheap insurance premium.


Choosing Benefit Period

How long do you want to receive the benefit? It may be 1, 2, or 5 years. As insurance costs also depend on the benefit period, you will need to decide to depend upon the risk involved in your work. Major injuries can make you unable to work for years, while minor injuries will only take a few months to recover from.

Income protection insurance policies can differ as per the insurer, so always check the details about the claiming process, injuries/illness covered, exclusions, or any other aspect that could impact how you go when claiming the benefit.

You can always check the insurer’s website for the product disclosure statement (PDS) to get a clearer idea about the insurer’s services or get a quote so you can understand all of the specifics of an income protection insurance policy for you.

Mike Wallis

Mike has over 25 years experience, having spent his first seven years working as a Broker at Jardine Lloyd Thomson in Melbourne and in 2002 was transferred to JLT’s Accident and Health Department in London. For four years (2002 – 2005) Mike was a specialist A&H Lloyd’s Broker and during this time developed excellent relationships with the Lloyd’s A&H underwriting fraternity. In 2006 he returned to Australia in a senior broking position with overall responsibility for Placement Strategy, including the implementation of underwriting facilities and the various authorities granted by Lloyd’s. Mike was the underwriter at two specialist Underwriting Agencies prior to founding Aspect Underwriting in 2016.