Work Cover for sole traders and partnerships

Insurance is vital for sole traders and partnerships to protect an ongoing income source in the absence of workers compensation insurance.

If sickness or accident strikes, a sole trader cannot rely on workers compensation insurance. This is because a sole trader is not defined as a worker, they are people who work for themselves but have not formed a company to work under.

This is why WorkCover, the regulatory body which manages the workers compensation system, recommends (1) that sole traders and partnerships protect themselves with income protection insurance.

Income protection insurance pays up to 75% of your income if you become sick or injured inside or outside of work.

Whereas worker's compensation insurance pays a benefit to 'workers' if they have an accident at work, or on the way to or from work.

Workers compensation insurance

Currently under workers compensation in all states of Australia, sole traders and partnerships are not defined as 'workers', and as such cannot be covered by workers compensation insurance.

The exemption to this rule is if the sole trader establishes a Pty Ltd company, and the company becomes the 'employer', and a workers compensation policy taken out under the company name to cover the 'working director'.

Since sole traders and partnerships are not covered under workers compensation insurance, WorkCover recommends (1) for such people to purchase income protection insurance to protect themselves.

Income protection insurance considerations

When looking for an income protection insurance policy it is important to find one best suited to your situation.

You can learn more about the best policy types for the self-employed to help select a policy which will give you the best outcome should you need to make a claim. Generally speaking you have the option of choosing between an agreed or indemnity style policy, each with its own pros and cons. For more in-depth information please discuss your needs with an xLife adviser.

Income protection insurance in Australia

If you are single, income protection insurance can help maintain your standard of living. If you have a family that relies on you, this type of cover can offer a failsafe way of providing income when you may need it most.

Income protection insurance is important for all working people, but perhaps more so for sole traders and partnerships in Australia. Contact xLife for your free income protection quotes and compare Australia's top policies today.

Source: 1. WorkCover NSW accessed 14/06/2011 http://www.workcover.nsw.gov.au/insurancepremiums/Policies/
doyouneedinsurance/Pages/Soletraderpartnership.aspx

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June 2011