Why the self-employed need it most
If illness or injury stops you working, income protection pays a regular, usually tax-free income until you recover or retire. With no employer sick pay, this is the cover that keeps the bills paid. The best policy depends on how long you could manage before payments start and how long you'd need them.
1. Long-term income protection
Pays until you recover, retire or the policy ends — the gold standard. Best for genuine financial security, as it covers long illnesses, not just short ones. Costs more but provides the most protection.
2. Short-term income protection
Pays for a limited period (often 1–2 years) per claim. Cheaper, and best for those who want affordable cover for shorter absences or have some savings to fall back on for longer ones.
3. Choosing your deferred period
The deferred period is how long you wait before payments start (e.g. 4, 8, 13, 26 weeks). A longer deferred period lowers the premium. Best matched to how long your savings could cover you — the longer you can self-fund, the cheaper the cover.
4. Own-occupation cover
Pays out if you can't do your own job, rather than any job — the most useful definition. Best for skilled self-employed workers; always check the policy uses "own occupation".
5. Setting the right benefit level
Cover is usually capped at a percentage of your earnings. Set it high enough to cover essentials but realistic to your income — over-insuring wastes premium. Best calculated from your actual monthly outgoings.
How to choose
- Maximum security: long-term, own-occupation, shorter deferred period
- Lower cost: short-term cover or a longer deferred period
- Match the deferred period to how long your savings last
- Always check it's "own occupation" cover
How to find the best income protection
Definitions and pricing vary widely between insurers, so whole-of-market advice matters. A protection specialist will match cover to your job and finances. Find an income protection specialist through Nesto — free, no obligation.
Frequently asked questions
Is income protection worth it for the self-employed?
For most, yes — with no employer sick pay, it's the cover that keeps your household running if you can't work.
What's a deferred period?
The wait before payments begin. A longer deferred period lowers your premium — match it to how long your savings could cover you.
What does own-occupation mean?
It pays out if you can't do your specific job, rather than any job — the most useful definition to look for.
How much of my income can I cover?
Usually a percentage (often 50–65%) of your gross earnings. It's capped to keep an incentive to return to work.
Short-term or long-term cover?
Long-term offers the most security; short-term is cheaper and suits those with savings or who want lower-cost cover.