Freelancing Series: What about Insurance and Benefits?

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October 07 2019
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Freelancers usually have control over their time, income and clients. However, they don’t receive insurance cover or enjoy government-mandated benefit payments.

But there’s no reason to be disheartened if you wish to become a full-time freelancer. Here’s what you need to know about insurance and benefits if you plan on becoming a full-time freelancer.

Insurance

Income from freelancing gigs don’t always come regularly, so paying for insurance cover may feel like a financial strain. However, this is also the reason why you are likely to need it.

It’s important to ensure that you have enough insurance cover to keep running your business in spite of slowdowns. Below are some insurance types you may wish to consider.

Income protection insurance
Some freelancing gigs have seasonal demands or a large number of competitors that could make it hard to secure a project. You may find yourself without clients and income for weeks or months at a time – a huge probability in some industries.

An income protection insurance can replace your income in the event that you lose your employment or are unable to get clients for a specified period. This type of insurance may pay out up to 80 per cent of your income.

Typical payout duration is anywhere between a few months up to two years, depending on your selected cover and premium.

Total permanent disability (TPD) insurance
You don’t get paid for sick days as a full-time freelancer; it’s one of the benefits you sacrifice when you leave your employee status. However, you may avail health and TPD insurance so that you can still get a payout in case your income-producing activities are compromised due to sickness or injury.

Critical illness cover
Likewise, consider paying for critical illness insurance cover if you are paying for mortgage or have debts. This cover is designed to pay out to the insured to pay debts or home alterations if they are diagnosed with a serious or debilitating disease that is covered by the policy.

Note: Health, TPD and critical illness insurance don’t pay out to dependants in case of death. If you have dependants, consider taking out a life insurance with additional TPD and critical illness cover instead.

Life insurance
A life insurance cover ensures that your dependants will receive a lump sum payment or income stream in the event of your death.

This type of insurance is a good investment if you have young or disabled child or a family member who is financially dependent on you.

Business equipment insurance
If your freelancing gig is dependent on certain equipment, consider taking out an insurance on your equipment.

A business equipment insurance will cover you for damage, loss or theft of equipment that you use to conduct business with. This includes mobiles, laptops, cameras and other gears or gadgets that you use for business.

This also applies even if you work from a home office because most home insurance don’t cover business assets.

Personal indemnity insurance
If your business or freelance gig involves providing advice to clients, consider taking out a personal indemnity insurance.

This type of insurance will cover you for any advisory mistakes or negligence that causes financial loss to your clients. For instance, a freelance portfolio manager may mistakenly forget to check a client’s risk profile before investing on their behalf. If the investment fails and the client files a complaint due to loss of their money, a personal indemnity insurance will cover the settlement.

Benefits

Needless to say, you don’t receive benefits if you freelance full-time unless you pay them yourself.

Superannuation
Since you technically work for yourself, your retirement savings is completely up to you because your clients are not liable to pay the 9.5 per cent superannuation guarantee.

In an employment arrangement, the government requires employers to enrol or contribute to their eligible employees’ chosen super fund or self-managed super fund. On the other hand, freelancers have the freedom to choose from a variety of retirement options outside of super, such as annuities.

Regardless of your choice, you’ll have to save up and pay for all the required contributions.

For more information on freelancing and super, read nestegg’s “Superannuation for the self-employed”.

Medicare
Australian residents are covered by Medicare, but you’ll have to pay for private health insurance if your freelancing income exceeds a certain threshold. If you don’t wish to pay for insurance, you may have to pay the 2 per cent Medicare levy.

Furthermore, singles who earn $90,000 and families with income above $180,000 may have to pay for Medicare levy surcharge.

About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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