Case Study – Disability Business Overheads Insurance

Jack is a carpenter with a gross income of $90,000 p.a. and his expenses of around $30,000 p.a. Jack’s expenses mainly relate to lease payments on his equipment and ute, as well as the cost of advertising and insuring his business.

Jack has an Income Protection policy of $3,750 p.m. covering 75% of his net income of $60,000 p.a. ($90,000 gross income minus $30,000 business expenses).


If Jack becomes disabled, and assuming he does not have Disability Business Overheads Insurance, Jack would have to use $2,500 p.m. ($30,000 p.a. ÷ 12 months) of his $3,750 p.m. IP benefit to pay his ongoing business expenses.

That leaves him only $1,250 p.m. to live on – significantly less than the $5,000 p.m. net income (before tax) he normally earns, and probably not enough to cover his normal living expenses.