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Income Protection Policies for the Carpentry Trade

Last modified: 15 May 2013

The training needed to become a skilled carpenter probably took you years to complete but the financial rewards you now see from your trade will often far outweigh the effort you needed to put in. This is why it would come as a major blow to your finances if for some reason you were unable to work due to injury or illness.

Admittedly being an employed carpenter in Australia has its benefits as you would be entitled to sick pay, superannuation and worker’s compensation by law. But what if you’re a sub-contractor or self-employed? Could you afford to live as you do now and keep your business afloat if you were unable to work for an extended period of time?

Income protection policies for carpenters and other skilled trades

Carpentry isn’t often thought of as a dangerous trade but circular saws, electric drills, razor-sharp chisels and various other pieces of equipment can do serious damage. It only takes a small lapse of concentration to put yourself off work for months or even years at a time. And what if you become ill with a debilitating long term illness that stops you from earning your living. Both of these scenarios are a realistic prospect so you need to be prepared should the worst happen.

An income protection insurance policy specifically designed for high income, skilled trades such as carpentry can help to pay your bills and keep you in business while you are too sick or injured to work. These policies are available from most life insurance and general insurance companies and they can often be tailored to suit your needs.

As a self-employed carpenter there are two types of income protection policy you might want to consider. These are as follows:

Income protection insurance

Being unable to work due to sickness or injury will mean you no longer earn a regular income. Without an income you’ll have to rely on savings or another form of finance to pay your everyday living expenses. Taking out an income protection insurance policy however will provide you with up to 75% of your average monthly pre-tax income in the event you can’t work for a prolonged period of time. Your average monthly income is calculated using figures from the 12 months prior to you making a claim on your policy, so the more you earn the more your insurance company pays you each month in benefits.

Two things to consider when setting up an income protection insurance policy are:

If you’re self-employed then you may want your benefit payments to start straight away, especially if you have no other income to fall back on. You may have savings you want to use up first though, in which case you can set your policy up to start paying a benefit 3 or 6 months after making a claim. The longer the gap between claiming and receiving payments the cheaper your premiums will be so it is worth postponing the start of your benefits if possible.

Similarly you’ll need to decide how long you want payments to be made for. Most standard policies stipulate between 1 and 5 years but it is possible to get policies that will continue paying benefits until you retire at the age of 65. The longer you have payments made for the higher your premiums will be so consider this when setting up your policy.

Business overheads insurance

This second type of insurance policy is taken out to cover the running costs of your business while you are unable to work. Again you can tailor your policy to cover the business overheads you have, such as the rental on a company van or the rental and utility bills on your business premises. These are costs that need to be covered whether you are fit for work or not and without business overheads insurance the money to pay them will need to come from your income protection insurance benefits, so leaving you with less to live on each month.

A business overheads insurance policy can often be bought in conjunction with income protection cover and it is worth looking to see if you can combine the two and lower your monthly premiums. The last thing you want is to return to work following a prolonged illness or workplace injury only to find your business is no longer viable because you couldn’t afford to pay your overheads and your everyday living costs from your policy income.



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