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How much is income protection?

Find out how much income protection costs and what impacts the cost and how you can reduce your premium.

There are a number of factors that impact the cost of income protection (IP) insurance. While each insurer follows its own particular guidelines, most also use a range of commonly agreed metrics to determine how much you’ll pay for cover. The factors insurers consider can be divided into two main groups: those concerning you (the insured) and those relating to your chosen policy. This article will provide an overview of the different factors that impact what you will pay and what you can do to reduce your premium. Ready to receive a quote now? Simply enter your details below and a consultant will be in touch to provide you with quotes from life insurance brands.

Some income cover price examples

The table below provides an example for how price is impacted based on age, smoking status and occupation. Please note that this should only be used as a very rough guide to show how premiums can be impacted. Premiums are subject to change based on a host of other factors including medical conditions and other personal characteristics. The price is for the monthly premium payable.

Age 35 55 35 35
Gender Male Male Male Male
Smoking Status Non-Smoker Non-Smoker Smoker Non-Smoker
Occupation Accountant - Qualified Accountant - Qualified Accountant - Qualified Underground Mining
Income $150,000 gross income $150,000 gross income $150,000 gross income $150,000 gross income
Price Range Per Month $57 - $102 $266 - $391 $72 - $128 $118 - $222

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Apply online without an adviser with these direct brands

Name Product Short Description Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Waiting Period
Protect your lifestyle with a new eligible Virgin Income Protection policy and you can earn up to 40,000 Velocity Points. Ends 31 October 2018. T&Cs apply.

5 years
14, 28, 60, or 90 days
Cover up to 75% (to a maximum of $25,000) of your monthly income with NobleOak Income Protection. Take out cover before 28 September 2018 and get your first month free. T&C's apply.

2 years or to the age of 65
30 or 90 days
Cover up to 75% of your monthly income if you can’t work due to illness or injury, up to a maximum of $10,000 a month. Take out cover today and you could get a bonus $100 Gift Card.
5 years
30 or 90 days
Cover up to 75% (to a maximum of $10,000) of your monthly income with Guardian Income Protection.
5 years
30 or 90 days
Receive up to 75% of your income (up to $10,000 per month) if you're unable to work due to serious illness or injury.
5 years
30 or 90 days
Receive up to 30% off in your premiums if you’re in good health and meet BMI qualification tests. T’s and C’s apply.
24 months
14 or 28 days

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Factors impacting income cover cost

Your situation and characteristics

Because no two people are the same, the degree of risk you represent to an insurer will depend on a number of factors.

  • Your age. The older you are, the more likely you are to become ill or injured, and the greater the risk you pose to the insurer. As a result, older people generally pay more for IP insurance than younger people.
  • Your occupation. Whether you’re a white collar, blue collar or self-employed worker will also determine your IP premium cost. Blue collar workers are generally viewed as higher risk, particularly those who work in potentially dangerous environments such as construction and mining.
  • Your gender. Insurers view women as a statistically higher risk than men due to the potential for health problems such as breast cancer and pregnancy complications. Also, women are more likely to retire early to care for children.
  • Your lifestyle. Insurers take your general health into consideration, including whether or not you smoke (smokers can pay up to twice as much as non-smokers), whether you have any pre-existing medical conditions and whether you participate in any risky sports or activities, which could result in an injury (and hence time off work).
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The policy that you choose

The policy you choose will also determine the premium you pay for IP cover. There are a variety of factors that affect the cost.

  • The benefit amount. The benefit period you choose and whether it’s less, equal to or more than 75% of your income will affect your premium cost.
  • The waiting period. How long you choose to wait before you receive your benefit after making a claim will also determine your premium cost (the shorter the wait, the higher the premium).
  • The options you select. Any additional benefits you choose to add to your policy will also increase the cost of your premium.

Aren’t my premiums tax-deductible? Yes, according to the ATO, you can claim the cost of your income protection premiums against the loss of your income. You can only claim benefits of an income and capital nature. What if I fund my premium through superannuation? You are generally not able to claim on your premium if your policy is taken out through superannuation and your cover is funded via superannuation contributions. How will stepped and level premiums impact what I pay? Another factor that will influence the amount you pay for your income protection insurance is whether you opt for stepped or level premiums. Stepped premiums start lower and then increase in steps along with your age. Level premiums, on the other hand, start higher but remain the same over the years. The type of premium structure you choose will depend on how long you plan to have IP cover. If you’re young and on a budget, you may want cheaper stepped premiums, which are more affordable early on. If you’re looking at keeping your IP cover for the long term, you might consider level premiums a better investment, as they can save you a considerable amount of money over the long haul. Income Protection Stepped and Level PremiumsHow does agreed value and indemnity value cover impact price? When applying for income protection, you are given two options on the income that your benefit will be based on in the event of a claim.

  • Agreed value: An agreed value benefit is based on the income that is agreed upon with your insurer at the time of application. You will need to prove your income to the insurance provider when you apply for cover based on your last two tax statements. This can be a safer bet if the nature of your occupation means that your income can see fluctuations.
  • Indemnity value: Indemnity value cover is determined at the time of claim. You will need to prove what you are earning at the time of claim. Obviously the disadvantage of this option is that your benefit payment will also be reduced if you experience a drop in your income.

So which is more expensive? The greater security of agreed value cover does come at a price. Premiums for Agreed Value policies are generally 20% higher than Indemnity policies.

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How can I reduce the cost of income protection?

Knowing the factors that influence the price of income protection insurance also gives you the means to reduce how much you pay. While you can’t do much about your age, you can improve your general health to lower your perceived risk to an insurer, such as by giving up smoking and losing weight. Here are some other ways you can reduce the cost of your IP premiums:

  • Shop around and compare policies. If you’ve been with the same insurer for a while, make sure you review your policy regularly to see if there’s a better deal out there. The IP insurance industry is highly competitive, so there’s a good chance you could find the cover you need at a cheaper price.
  • Receive help from a consultant. An experienced income protection consultant can help you compare policies from a number of different providers. They can look out for discount offers and find providers that are willing to work with you if you suffer from a pre-existing condition or work in a high-risk occupation.
  • Increase the waiting period. If you have savings and accumulated sick leave and think you could survive without a pay cheque for longer than your current waiting period, consider increasing the length of your waiting period in order to reduce the cost of your premium.
  • Reduce the benefit period. If you think you could fully recover and return to work in a shorter time frame than your current benefit period allows, consider reducing the benefit period, which would reduce your premium as well.
  • Opt out of CPI increases. Choosing not to have your benefit amount and premium increased annually in line with the consumer price index (CPI) would mean cheaper premiums in the future but also a reduced amount at claim time, as your benefit loses its value against inflation.
  • Streamline your policy. Another way to reduce your premiums is to find a policy that allows you to tailor your benefits by including only what is relevant to your situation and removing what you don’t need.
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Ready to receive a quote for income protection insurance?

If your ready to start comparing policies and quotes, you can make a secure enquiry with an insurance consultant by submitting your details in the enquiry form above. A consultant will be in touch to provide you with quotes from a range of different providers and assist you with your policy application. Why work with a consultant to purchase cover?

  • No extra charge to you. They receive a commission from the insurance provider based on clients they sign-up for cover
  • They have access to multiple companies and compare at once...taking the legwork out for you
  • They can help you structure your premium to meet your needs and budget
  • Consultants can use their knowledge of the market to find cover for those considered "high-risk"

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William Eve

Will is a personal finance writer for specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.

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