Income Protection Insurance Australia :: Articles

Income protection insurance

What is income protection insurance and why is it important for Australians?

Income protection insurance

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

It's trite but true to say that, for most people, their most valuable asset is their ability to earn an income. But how relevant is income insurance to most Australians?
Ask yourself what would happen if you woke up tomorrow and found you were incapable of working for an extended period.
Could you support your household?
Meet your loan repayments?
Save for the future?
Income protection insurance, also known as disability insurance, pays you an income if you are unable to work because of sickness or injury.
You can insure to receive payments (usually monthly) of up to 75 per cent of your current income while you're out of action.

Doesn't WorkCover or my super fund already protect me?

Insuring your most valuable asset
Image for Insuring your most valuable assetWhile many people would consider their home or their car to be their most valuable asset, it's your ability to earn an income that is most important in shaping your financial future. Statistically, two thirds of working Australians will suffer an injury or illness that will sideline them for 90 days or more. The majority of these people would not be able to pay their mortgage or meet car finance and other loan commitments without adequate income insurance.
WorkCover protects you if your injury is connected with work. But it doesn't cover you for sickness or if you have an accident hiking on holidays.
It's worth checking on your super fund, though. Many super funds now provide salary continuance insurance which will pay you an income for up to two years if you're unable to work.
This may mean you can get away without income protection insurance, or opt for a cheaper policy.

How do I choose an income protection policy?

It's worth talking to an adviser (as opposed to a salesperson) about which one suits your needs. Most insurers have several products on offer and a range of options that come with each product.
The first choice is between an agreed-value policy and an indemnity policy.
With an agreed-value policy, you have to prove your income up front, but once that's done, you know exactly what you'll be paid if you're unable to work.
This type of policy is more expensive, but suits people like the self-employed who have variable incomes and want some certainty about their claims.
With an indemnity policy, the company generally insures you for what you say you earn up front, but asks you to verify your income if you make a claim.
Both types of policy can be increased each year for inflation, but if you're likely to have a rising income, it may also make sense to choose a policy that allows you to increase the sum insured without the need for new applications and medicals.
Income protection policies also come in basic and deluxe versions.
The basic version generally provides you only with income payments while the deluxe version can have add-ons such as paying nursing care or accommodation benefits or paying benefits immediately if you have an accident - rather than insisting on the normal waiting period.
It's also important to understand exactly when you can claim.
All income protection policies include definitions on when you are unable to work.
Some of the cheaper policies, for instance, say you can claim only if you are unable to perform your normal job; other policies will pay if you are unable to perform one or more of your important duties.
Policies also have exclusions - circumstances in which they won't pay - which are worth knowing.
There is also a range of choices to make on issues such as how long you're prepared to wait before making a claim and how long you want the income payments to go for if you do claim.

Is income protection expensive?

Premiums can vary significantly.
As a rule, women and blue-collar workers pay more, though the increase in stress-related claims by white-collar workers has resulted in higher premiums - especially for professionals such as doctors and lawyers.

Can I do anything to cut the costs?

Income protection insurance is tax-deductible, so the costs can be reduced by making sure you claim your premiums in your annual tax return. (But any claims you make will be taxed as income.)
Outside this, the simplest way to cut the premium is to opt for a longer waiting period or limit the period in which you can claim.
Waiting periods can extend as far as two years while income payments can be for as little as a couple of years or up to age 65.
Some insurers will give you a discount if you provide evidence of your income up front, and some offer lower premiums if you agree to a 12-month limit on payments for conditions caused by mental disorders such as depression or stress.
Many people also don't realise that they can insure for less than 75 per cent of their income - maybe insuring the full amount for the first two years and then 50 per cent after that.
Needless to say, you can also cut costs by not paying for extras that you don't think you'll need.
But bear in mind that the real test of the policy comes when you make a claim - paying a few extra dollars for certainty can be better than simply taking the cheapest deal going

Published: Sunday, 1st Aug 2021
Author: Paige Estritori

Rate this article

0 Comments

No comments yet. Be the first to share your thoughts.


Life Insurance Articles

Breaking Down the Barriers: Understanding Income Protection for Self-Employed Aussies
Breaking Down the Barriers: Understanding Income Protection for Self-Employed Aussies
Hello to all the self-employed Aussies out there! Embarking on the journey of self-employment brings with it a unique set of challenges and freedoms. One area we often overlook is the need for a solid financial safety net, customized to our varied incomes and work lifecycles. That's where income protection insurance steps in as a critical component for ensuring financial stability. - read more
Avoiding Overinsurance: How to Choose Adequate Coverage Without Wasting Money
Avoiding Overinsurance: How to Choose Adequate Coverage Without Wasting Money
Income protection insurance is a key component of financial planning that safeguards your earning potential in the untimely event of illness or injury. In Australia, it reassures individuals that their most valuable asset, the ability to earn, is shielded against unforeseen circumstances. Adequate income protection can provide peace of mind, with the security of a regular income even when you're unable to work. - read more
Making Sense of Income Protection Insurance: A Must-Read Comparison for Australians
Making Sense of Income Protection Insurance: A Must-Read Comparison for Australians
When life throws unexpected challenges our way, the assurance of financial stability can be a beacon of hope amidst the uncertainty. For many Australians, income protection insurance is that beacon, safeguarding their livelihood and providing a crucial safety net when they need it most. It's more than just a policy; it's a strategic step towards longer-term peace of mind. - read more
What Australians Need to Know Before Choosing an Income Protection Plan
What Australians Need to Know Before Choosing an Income Protection Plan
Income protection insurance is a critical safety net for Australians, offering financial security in the event that one is unable to work due to illness or injury. The peace of mind it brings cannot be overstated, as it ensures that individuals and their families can maintain their standard of living even when the unexpected happens. - read more
Understanding the Tax Benefits of Income Protection Insurance in Australia
Understanding the Tax Benefits of Income Protection Insurance in Australia
Income protection insurance is a crucial safeguard for many Australians, designed to provide financial stability in the event that you are unable to work due to illness or injury. This type of insurance delivers a regular income, usually up to a certain percentage of your regular earnings, ensuring that you can meet your financial obligations even when your health prevents you from earning a wage. - read more
How to Protect Your Income During Health Setbacks: A Complete Guide
How to Protect Your Income During Health Setbacks: A Complete Guide
Income protection is a crucial safety net for Australians, offering financial security when health setbacks strike. This type of insurance ensures that you continue to receive a portion of your income if illness or injury prevents you from working. It’s an essential aspect of financial planning, providing peace of mind knowing that you can maintain your lifestyle even when unforeseen health issues arise. - read more

Insurance News

Hostplus and MetLife Extend Partnership to Strengthen Member Insurance Offerings
Hostplus and MetLife Extend Partnership to Strengthen Member Insurance Offerings
03 Jun 2026: Paige Estritori
Hostplus, a leading Australian superannuation fund, has announced the extension of its group insurance partnership with MetLife Australia until June 2028. This strategic move aims to enhance the insurance benefits available to Hostplus members, reflecting the fund's commitment to providing comprehensive and cost-effective coverage. - read more
Rising Mental Health Claims Lead to Surge in Income Support Access
Rising Mental Health Claims Lead to Surge in Income Support Access
27 May 2026: Paige Estritori
Recent data reveals a concerning trend: over 8 million Australians are now accessing some form of income support, marking an increase of approximately 2 million individuals over the past decade. This surge is predominantly driven by a rise in mental health-related claims, underscoring the pressing need for comprehensive mental health support and effective income protection strategies. - read more
Acenda Life Introduces Higher Coverage Limits in Income Protection Policies
Acenda Life Introduces Higher Coverage Limits in Income Protection Policies
27 May 2026: Paige Estritori
Acenda Life has recently implemented a series of updates to its Retail Life Insurance portfolio, effective from 11 April 2026. These changes are designed to provide greater flexibility and accessibility for Australians seeking income protection insurance, addressing common concerns about policy limitations and entry age restrictions. - read more
HESTA Announces 12% Reduction in Insurance Fees for Members
HESTA Announces 12% Reduction in Insurance Fees for Members
19 May 2026: Paige Estritori
HESTA, a leading Australian superannuation fund, has unveiled a significant reduction in insurance fees, set to take effect from 1 July 2026. This initiative aims to make insurance coverage more accessible and affordable for its members, aligning with the fund's commitment to enhancing member benefits. - read more
AFCA Supports Insurer's Application of Offset Clause in Income Protection Case
AFCA Supports Insurer's Application of Offset Clause in Income Protection Case
19 May 2026: Paige Estritori
The Australian Financial Complaints Authority (AFCA) has recently ruled in favour of Nippon Life Insurance in a dispute concerning the application of an offset clause in an income protection (IP) claim. This decision underscores the critical importance of policyholders understanding the specific terms and conditions of their insurance policies. - read more
NEOS Elevates Income Protection with Increased Medical-Free Limits
NEOS Elevates Income Protection with Increased Medical-Free Limits
19 May 2026: Paige Estritori
NEOS has recently announced significant enhancements to its income protection offerings, effective from 11 March 2026. Responding to adviser feedback, the insurer has increased the maximum coverage available without mandatory medical examinations, aiming to simplify the application process for Australians seeking income protection insurance. - read more

Start Here !
disability protection
Apply now for your free Insurance assessment and price comparisons!

Start Here:

Cover Type:
Postcode:

All quotes are provided obligation-free by a participating broker from our national referral partner network. We respect your Privacy.

All quotes are provided free and without obligation. We respect your privacy.

Knowledgebase
Loss of Use:
Insurance coverage that pays for the additional living expenses if your home is uninhabitable due to a covered loss.