Running your own business can be incredibly rewarding. Whether you’re a sole trader, contractor, or small business owner, being your own boss gives you freedom and flexibility. However, for the almost half-a-million self-employed Kiwis, it also comes with added responsibilities, particularly around protecting your financial future.
One critical area often overlooked is personal insurance. Without the safety net of employer-provided personal insurance, it’s essential to take steps to safeguard your livelihood. Here’s what you need to know about the key types of personal insurance if you are self-employed.
If you’re self-employed, your business likely depends on your ability to work. But what happens if illness or injury leaves you unable to work for an extended period? Income or Mortgage Protection Insurance can be your financial lifeline.
These policies cover a percentage of your income (typically around 75%) or an agreed value if you’re unable to work due to illness or injury. While employees may have sick leave, self-employed people often don’t have that luxury. Income and Mortgage Protection policies help ensure you can recover without worrying about lost income.
It’s important to note the difference between Income Protection Insurance and ACC coverage. ACC covers injuries caused by accidents but doesn’t cover illnesses or conditions like cancer, stroke or heart disease. Income or Mortgage Protection Insurance fills this gap, providing coverage for non-accident-related illnesses.
Additionally, self-employed individuals can sign up for ACC CoverPlus Extra (CPX), which allows you to choose the level of income you want to cover in case of an accident. This can also make your income protection premiums more affordable, as insurers consider your CPX coverage when setting premiums.
Your health is likely tied to your ability to run your business. While New Zealand’s public healthcare system is generally good, long waiting times for non-urgent treatments can be problematic. Private health insurance provides faster access to medical treatment and specialists, allowing you to get back to work more quickly.
Health insurance can also cover tests, procedures, and surgeries that may not be fully funded by the public system. For self-employed individuals who rely on their health to keep their business running, this can be invaluable.
You’re likely pouring a lot of time and energy into building your business, but if you were no longer around, a life insurance policy can help ensure that your family and dependents are financially protected if you pass away.
Life insurance provides a lump sum payment to your beneficiaries, which can be used to pay off debts, cover living expenses, or provide for your family’s future.
For business owners, life insurance can also protect your business, ensuring it continues smoothly without financial strain in the event of your death. If you have dependents, significant loans, or a mortgage, life insurance should be an essential part of your financial plan.
Trauma insurance offers a lump sum payment if you’re diagnosed with a critical illness like cancer, a heart attack, or a stroke. If you’re self-employed, trauma insurance can be a crucial safety net. A serious health event could severely impact your ability to generate income and manage your business.
A lump sum trauma payout can help cover medical bills, keep your business afloat, or pay for other necessary expenses while you focus on your recovery.
Although not strictly personal insurance, Business Continuity Insurance is also worth considering if your business relies heavily on you. This coverage helps keep your business running by covering expenses like rent and employee wages if you’re temporarily unable to work due to illness or injury. These policies are particularly useful for small businesses where your role is critical to day-to-day operations.
Being self-employed comes with freedom, but also unique risks. Without an employer to provide coverage, it’s up to you to protect yourself, your family, and your business. Investing in personal insurance, can help shield you from the financial consequences of illness, injury, or unexpected life events.
To take action, talk with one of our insurance specialists today about your options. Our consultations are free and our team will help you put a plan in place that suits your needs giving you peace of mind and the ability to focus on what you do best – growing your business!
To book a free consultation with our team, click here.
The content of this article should not be taken as financial advice, or a recommendation of any financial product. These insights are based on current economic commentary, market pricing for interest rates, and our personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.
