A Guide to Income Protection in Australia

How would you pay your bills if you were unable to work due to illness or injury? Income protection insurance can solve that problem for you. 

• Income protection insurance pays a portion of your income if you become unable to work due to illness or injury.

• Premiums and policy inclusions vary widely between insurers and depending on your personal circumstances. 

• The expert team at Compare Club makes it easy, fast, and simple to find the income protection insurance for you.

Income protection costs

The cost of income protection insurance in Australia varies widely between insurers. It is typically calculated based on the following factors: 

• Your age: Younger people typically pay lower premiums because they are generally considered less likely to make a claim than older people.

• Your job: Occupations that involve higher physical risk tend to attract higher income protection premiums.

• Your health: Your current health status, medical history, and lifestyle habits (such as smoking) can impact premiums.

• Your income: Higher income levels generally mean higher premiums because the benefit payout would be large.

• Your benefit period: The longer you want to receive payments if you are unable to work typically attracts higher premiums.

• Your waiting period: Shorter waiting periods usually increase premiums because the insurer starts paying you sooner after a claim is made.

Income protection - Costs by insurer

Here are some examples of how much you might expect to pay for income protection insurance in Australia. 

But remember, the cost of income protection insurance varies widely depending on your personal circumstances.

So it’s always best to compare providers to find the income protection insurance that you are looking for ( or that meets your requirements). 

*Calculated based on a 42-year-old, non-smoking male in NSW with a $5,000 maximum monthly benefit. 

Why Compare Income Protection Insurance

Comparing income protection providers isn’t just about finding the lowest premiums.

The experts at Compare Club can help you assess optional add-ons such as rehabilitation and family care benefits, cover for mental health conditions, and partial disability payments.

This helps you ensure you’ll get the income protection insurance that you think is suitable for you.

Income protection waiting periods

Many income protection policies don’t start paying out immediately after you become unable to work.

Rather, they impose a waiting period between your illness or injury and when the insurance company starts paying your benefits.

Typically, shorter waiting periods increase the premiums you’ll pay.

Benefits to income protection

Income protection insurance can be a valuable financial safety net if you become unable to work due to injury or illness.

Most policies provide a regular replacement income, which means you’ll still be able to pay your bills and look after your family if your employer is no longer paying you.

Some income protection insurance also offer optional add-ons like rehabilitation support that may offer extra support for rehabilitation programs.  

Who is income protection for?

Income protection insurance may be particularly helpful for self-employed people or tradies who may not have access to employer-provided sick leave or other support.

However, employees can also significantly benefit from income protection insurance, particularly if you have dependents or other substantial financial commitments like a mortgage.

Key Terms

Benefit amount: The monthly payment you receive if you are unable to work due to illness or injury. Typically, it is a percentage of your pre-tax income.

Waiting period: The time between when you become unable to work and when you start receiving benefit payments.

Benefit period: The maximum length of time you can receive benefit payments for a single claim.

Pre-existing condition: Any medical condition that existed before the insurance policy was taken out. 

Indemnity value policy: A policy where the benefit amount is based on your income at the time of the claim.

Agreed value policy: A policy where the benefit amount is agreed upon when you take out the policy, based on your income at that time.

Own occupation: You are considered disabled if you are unable to perform the duties of your specific occupation.

Any occupation: You are considered disabled if you are unable to perform the duties of any occupation for which you are reasonably suited by education, training, or experience.

Frequently Asked Questions

What is income protection?

Income protection insurance provides you with a regular income if you are unable to work due to illness or injury. It ensures that you continue to receive a portion of your income while you recover.

What income protection doesn’t cover?

Income protection insurance may not cover certain pre-existing conditions, self-inflicted injuries, elective medical procedures, or illness or injury resulting from substance abuse, hazardous tasks, and criminal activity. 

What does income protection cover?

Most income protection policies typically cover a portion of your income if you are unable to work due to illness or injury. Some policies may also continue to pay benefits if you are only able to return to work in a reduced capacity. Depending on the terms of the specific policy, income protection insurance  may also help cover rehabilitation costs.  

Is income protection worth it?

That depends on your perspective. If you are willing to pay a monthly premium to protect your income in case of illness or injury, then income protection insurance may be a worthwhile investment for you.

Does income protection cover redundancy?

Income protection insurance generally does not cover redundancy or job loss due to involuntary unemployment.

Do I need income protection?

If you and your family depend on your income to meet your financial commitments, then income protection insurance could be useful for you.   

How much income protection do I need?

That depends on how much of your income you want to protect. If you can live off a smaller portion of your income while you’re unable to work, then you can typically lower the premiums you’ll pay by reducing the portion of your income that you choose to cover. 

How does income protection work?

If you become unable to work due to an eligible illness or injury, you can generally make a claim on your income protection insurance policy. After you serve the specified waiting period, you’ll start to receive regular payments (usually monthly) from your insurer. 

How to claim income protection?

Claim processes tend to differ slightly between insurance companies. However, you’ll likely need to complete a claim form and provide documentation like a medical certificate or report, income verification such as payslips or tax returns, and confirmation from your employer that you are unable to fulfil your work duties.

Additional resources

Use this budget planner to work out how much income insurance you need. 

income protection insurance is just a quick click away.

Sources

1. Income protection insurance, MoneySmart

2. Rehabilitation benefits - the unsung heroes of income protection insurance, Money Management

3. What is Income Protection?, Insurance Line

4. Income Protection And Redundancy Or Unemployment, Insurance Watch

Matthew Lang is the general manager of life insurance at Compare Club. Matthew leads a team of dedicated professionals who are passionate about helping individuals and families make informed decisions about their life insurance needs. Whether it's finding the right coverage for your specific circumstances, comparing policies, or optimizing your existing policy, Matthew and his team are here to provide expert guidance and support.

Meet our life insurance expert, Matthew Lang

Matthew's top life insurance tips

• 1

  Identify what you want out of life insurance before you buy. Knowing the purpose of your life cover will help you choose a policy that meets your needs.

• 2

  It's easy to assume that the sole purpose of life cover is to leave money behind for your family, but there's more to it than that.

• 3

  Life insurers like those on our panel pay an average of 97% of claims in full.

• 4

  There are different types of life insurance, including term life insurance, income protection, trauma cover and total and permanent disability cover.