Income protection insurance for tradies: what actually happens if you can't work
By Yamate · Last updated August 2026
What happens to my income if I break an arm?
Nothing arrives. Going out on your own swaps a boss's risk for your own upside — you keep more of what you earn and you choose your jobs — and sick leave, employee workers compensation, and an employer's obligation to keep paying you all disappear on the same day. Working on your own ABN generally puts you outside the workers compensation system that covers employees.
None of that is a reason not to go out on your own. It is a reason to check what covers the gap instead of assuming something does.
What does income protection actually pay?
A percentage of your income, paid regularly, if illness or injury stops you working past a waiting period you choose. It replaces income during a bad stretch. It does not hand over a lump sum, and it is not the same thing as trauma or TPD cover.
| What varies between policies | Why it matters |
|---|---|
| Waiting period | How long you're off before payments start — shorter costs more |
| Benefit period | How long payments can continue — a few years, or to a set age |
| Percentage covered | Most cap well below 100% of income by design |
| Inside or outside super | Affects both the premium and the tax treatment |
How much cover do I actually need?
Size it from what a bad month costs to survive, not from what you earn. Write down the four numbers that do not stop when you do:
| A worked example | Per month |
|---|---|
| Mortgage or rent | $2,400 |
| Food, fuel, power, phone, school costs | $1,600 |
| Ute payment, tool finance, insurances | $900 |
| Minimum business overheads that keep running | $400 |
| What a month off the tools really costs | $5,300 |
Those are illustrative figures, not yours — put your own in. But the shape holds: the number is usually well under full income, because a month off the tools also stops fuel, materials and the tax on income you did not earn. Sizing cover to $5,300 a month is a very different premium to sizing it to a $9,000 turnover month, and it is the honest number.
Then pick the waiting period against your cash buffer. A 30-day wait means covering the first month yourself; a 90-day wait costs less each month and means covering three. If you have $5,300 in the business account and nothing else, a 90-day wait is a gap you have not actually closed.
Where do I get advice on it?
From a licensed financial adviser, because the right structure depends on your income, your super, and what you are already covered by. Yamate does not arrange, advise on or sell cover, and does not recommend any insurer or policy. HPartners in Brisbane and Toowoomba does financial advice and planning including this kind of cover — worth a look if you have never sat down and worked out what you are exposed to.
Sort the admin, so the rest is one less thing →Yamate handles the quoting, invoicing, chasing and job records for solo tradies and small crews, and shows your GST, tax and profit per job as an estimate as you go. It is not tax advice, it does not lodge your BAS, and you still lodge your own returns. Founder plan $19/mo if you sign up before 30 September 2026, $29/mo after; Company plan $79/mo for ten people, $15/mo per person after that. 30-day free trial, everything unlocked, no card needed. No lock-in, cancel anytime. Prices in AUD.
FAQ
What happens to a sole trader's income if they get injured?
Unlike an employee, a sole trader has no employer sick leave and no pay while off the tools unless they've arranged something themselves. Workers compensation generally doesn't cover a sole trader working on their own ABN the way it covers an employee.
What does income protection insurance actually cover?
Typically a percentage of your income, paid regularly, if illness or injury stops you working past a waiting period you choose. It replaces income, not a lump sum.
Is income protection insurance tax deductible for tradies?
Premiums held outside superannuation are generally tax deductible for individuals, though exact treatment depends on the policy and your circumstances. Check with your accountant or financial adviser.
How much income protection cover does a tradie actually need?
Enough to cover essential outgoings, not necessarily full income, since most policies cap well below 100% anyway. Work out what a genuinely bad month costs to survive, then size cover to that.
Related
General information only, not financial or insurance advice. Yamate does not sell or recommend specific policies. Whether income protection suits you, and what structure and cover level, depends on your own circumstances — speak to a licensed financial adviser. This page describes the position as read in August 2026.