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Compare features and then click the green button to tailor your quote. If you're a high earner, keep an eye out for the maximum monthly benefit as it varies between brands.
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Income protection insurance is essentially an insurance policy for your salary. If you become too sick or injured to earn a living, the income protection policy will kick in and act as a replacement. In some cases, it will even replace your salary if you're made redundant.
However, income protection insurance will only cover a maximum of 75%-85% of your salary, depending on which policy you choose. That means if you earn $5,000 a month, your potential benefits will be capped at $3,750-$4,250 a month. As well as limiting the payout amount, income protection insurance also limits the length of time you can receive payouts. Usually, the maximum is either two or five years. In some cases, you may be able to receive benefits until the age of 65.
Did you know? Finder surveyed 8,000 Australians and just 35% said they'd be able to last more than 3 months if they lost their job tomorrow.
There's an easy way to figure out if you could benefit from income protection insurance:
Did you know? The maximum disability benefit you'll receive from the Australian government is $472.15 per week.
When you have financial obligations, such as a lease, mortgage or car loan
When you are planning to have a family and your partner may take extended time off
When you become self-employed or start a business
When you have a partner or dependents who rely on your income
Comparing income protection insurance online is the easy way to find a policy that is right for you. However, there are some key terms you'll need to understand before getting started:
This is the highest possible benefit.
Usually, it's around $10,000 but can reach as high as $25,000. If you earn less than the maximum monthly benefit amount, you won't be impacted. However, high earners should pay particular attention to this.
Some insurers will cover up to 75% of your income while others in comparison will cover up to 85%.
As long as you don't exceed the maximum monthly benefit, this feature is what tells you how much you'll potentially be able to claim.
This is the maximum length of time you'll be able to claim benefits.
It varies between 2 years, all the way up to the age of 65. This doesn't mean you're guaranteed benefits for this length of time though. You can choose a shorter period, or you may recover before the maximum period has been reached.
Insurers apply waiting periods before you can make a claim.
This is the length of time you have to wait between finishing work and lodging a claim. It varies between 14 days all the way up to 3 months. The longer the waiting period, the cheaper the premium.
This is the age at which you will no longer be able to renew your policy.
For most insurance companies, this is when you reach 65 or 75 years old.
This means premiums are calculated based on your age.
The younger you are, the cheaper your premiums will be. However, your premiums will go up every year and it can be tough to figure out how expensive your policy will be in the long run.
This means your annual premiums aren't based on age.
They'll start off more expensive than stepped premiums, but the price rises will be much more gradual. It's much easier to get an idea of the long-term cost with level premiums.
Most income protection policies will offer some additional benefits.
These may be complimentary or they may come at a cost, but they're a great way to differentiate between policies and tailor cover to suit your needs.
Income protection insurance is designed as a temporary replacement for your salary, so you can spend it however you like. Remember, you'll have a little bit less to work with because income protection will never cover more than 85% of your wage, but it can still help with the following:
Did you know? A Finder survey found that 29% of Aussies already struggle to pay their rent or mortgage.
In Australia, the maximum amount of income protection you can get is the equivalent of 85% of your regular earnings. However, some insurers will only cover up to 75% of your income.
Although it's possible to insure up to 85% of your income, you might not need or want to. If you choose to insure a smaller percentage of your income, your monthly premiums will be lower. So how do you figure out how much of your income to insure? Well, start by asking yourself these important questions:
If you could easily live on 50% of your wage, there might not be much point getting a policy that covers 85% of it. This could easily be the case if you have a passive form of income, like an investment property, or a partner who also earns a wage.
If you've built up a decent emergency fund over the years, you might only need to insure a smaller portion of your income. You'll have to tap into your savings to supplement the rest, but that's what it's there for.
Check to see if you have any income protection in your super account as that may also offer a benefit. Other policies, such as mortgage protection insurance and personal injury insurance, can also help.
There are two ways to answer this question – how long you hold a policy for and how long you can receive benefits for.
You can hold a policy until you reach the expiry age listed in your PDS. For most insurers, that will be when you turn 65 or 75. However, because income protection gets more expensive as you age, the policy may become unaffordable by that point.
The length of time that you can receive benefits is listed in your PDS. For most insurers, it's a maximum of 2 or 5 years, but some will pay out until you reach the age of 65. However, you can only receive benefits while you're unable to work – if you recover and can return to work, your benefits will stop.
The price you'll pay for income protection insurance will vary significantly depending on lots of different factors. However, we did some cost research to give you a rough idea of what you can expect to pay in different scenarios.
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Your income protection insurance quote is highly dependent upon your own personal circumstances. The tables below show just how much a quote can change due to occupation, sex and smoking habit.
*These tables were created using the average of three quotes from three different insurers. The profile used is a 40-year-old with no pre-existing medical conditions. They requested a $3,000 monthly benefit, with a benefit period as close to one year as possible. The waiting period was set as close to 30 days as the insurer would allow.
It's hard to give an accurate picture of how much income protection might cost because the price can be influenced by many different factors.
Factor | What happens? |
---|---|
Biological sex | Premiums are generally cheaper for men |
Age | Younger people pay less for income protection insurance |
Profession | People in high-risk or very physical jobs will pay more for income protection |
Health | People with pre-existing medical conditions may pay more or face more exclusions |
Smoking habit | Smokers will pay more for premiums or be declined cover altogether |
Benefit amount | The higher the potential monthly benefit, the higher the premiums |
Waiting period | Setting a longer waiting period will reduce your premiums |
Benefit period | A shorter benefit period will mean cheaper premiums |
Additional benefits | Policies with lots of added extras may be more expensive |
Hobbies | People with high-risk hobbies may face more exclusions or higher premiums |
For a lot of people, yes. Our research shows that a healthy 40-year-old can easily protect $3,000 of their monthly income for somewhere between $40 and $100 a month. Even if we use the upper limit of that scale, it's only $1,200 a year. In many cases, income protection insurance is cheaper than car insurance, it's cheaper than health insurance and it's even cheaper than a gym membership.
While all of those other expenses are important, they can't save your car or home from being repossessed, they can't cover your kids' school fees and they can't pay for groceries. Income protection insurance can.
Yes. Heaps of them. In fact, we looked at 10 different income protection insurance policies and found a total of 21 extra benefits. We've listed them below, so if you come across any extra benefits and aren't sure what they mean, you can use the table below to double-check. Remember, these extra benefits will vary between different insurers, and they may be complimentary or they may cost you extra. Always check with your insurer to be sure.
Benefit | What it means |
---|---|
Death benefit | A lump-sum benefit to your family if you die |
Terminal illness benefit | Pays a lump sum if you're diagnosed with a rapidly-progressing terminal illness |
Permanent disability benefit | An extra lump sum if your injury or illness makes you permanently disabled |
Partial disablement benefit | The insurer may pay a reduced benefit if you are still able to work in some capacity |
Specific sickness or injury | If you suffer a specific sickness or injury, the insurer may pay a lump-sum benefit |
Recurring disablement | If you return to work for a short time and then suffer a recurrence of the same injury or illness, you won't have to serve a second waiting period |
Kids injury benefit | Pays a lump sum if your child sustains a specific injury or, in some cases, a specific illness |
Rehab benefit | Pays an extra monthly payment to cover the cost of rehabilitation and help you return to work |
Return to work | Pays a bonus if you complete an approved rehabilitation program and return to work |
Needle-stick injury | This will pay a benefit if you become infected with a certain illness as a result of a needle-stick injury or splash injury while at work |
Elective surgery | Pays a monthly benefit if you remain totally disabled due to cosmetic or elective surgery |
Spouse | If your partner or spouse has to stop working due to your medical condition, the insurer may pay a monthly benefit |
Nursing care | If you need the full-time care of a nurse, the insurer may pay a benefit before the waiting period is up |
Holiday injury | Pays a lump sum if you're injured on an Australian public holiday, a public school holiday or when you're at least 200km away from home |
Accommodation | Covers accommodation costs for any immediate family members if you are totally disabled and confined to a bed or hospitalised more than 100km from home |
Relocation | Reimburses the cost of a flight home if you are permanently disabled outside of Australia |
Automatic indexation | To help protect against inflation, the insurer may automatically increase your benefit amount in line with the CPI |
Premium pause | This allows you to pause your premiums, and your cover, for a set period of time and for pre-agreed reasons |
Premium waiver | If you're receiving benefits, the insurer will waive the premium throughout that period |
Guaranteed future insurability | Allows you to increase your monthly benefit by a certain percentage when your salary increases, without providing further evidence of your health |
Member benefit | May pay an additional benefit if you have other forms of insurance with the same company |
There are different types of income protection insurance – retail, direct and through a super. Each option has its own pros and cons.
Info | Pros | Cons | More | |
---|---|---|---|---|
Retail | You'll usually buy a retail policy after speaking to a broker |
|
| Speak to a broker |
Direct | You'll buy a policy directly from the insurance company |
|
| Compare online |
Super | Your super fund will provide cover to its members. It may be optional. |
|
| Learn more |
Income protection insurance is a very popular product in Australia and there's no shortage of options. The table below shows the full list of direct Finder partners as well as the insurance companies our broker partners collaborate with.
Although income protection insurance is designed to kick in when you're too sick or injured to work, there are some exceptions to the rule.
There are many different types of life insurance. Income protection is just one of them. It's different from most other life insurance policies because it provides a monthly benefit rather than a lump sum. The table below shows the different types of life insurance as well as what they do. Often, you can mix and match to create a package with multiple forms of protection. Or you can take out one standalone policy if you feel that's enough.
Type of policy | What it does |
---|---|
Life (death) cover | Pays out a lump sum if you die or, in some cases, are diagnosed with a terminal illness |
Trauma insurance | Pays out a lump sum if you're diagnosed with a specific medical condition |
Total and permanent disability (TPD) | Pays out a lump sum if you become totally and permanently disabled due to illness or injury. May pay out a partial benefit if you are partially disabled |
Funeral insurance | Covers the cost of your funeral up to a certain amount |
Personal accident | Pays a lump sum if you're injured or killed, but does not provide illness cover |
Mortgage protection | Covers your mortgage payments if you die, become seriously ill or lose your job |
Salary continuance | Like income protection but more restrictive and is only available through your super |
Income protection insurance can be tricky to understand at first, but don't give up. Give our beginner's guide a go and see if that helps.
If you're looking for a bit more info on how pricing works, check out our research on the average cost of income protection insurance.
If there's still something you can't find, feel free to drop us a comment. We'll do our best to clear things up for you.
Picture: GettyImages
Icons made by Nikita Golubev, Freepik from www.flaticon.com
Nicola Middlemiss is a senior writer at Finder, focusing on all things insurance. She's been a journalist for over five years and has contributed to a wide range of industry publications including Insurance Business, MoneyMag, the Educator, Your Investment Property, Mortgage Professional Australia, and Wealth Professional. She has written over a thousand articles covering the insurance industry and now uses that insight to help Australian consumers understand their own insurance policies, and make smarter decisions. Nicola has a Tier 1 General Insurance (General Advice) certification and a Bachelor's degree from the University of Leeds.
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Income protection for couples ensures your partner isn't hurt financially if you are temporarily unable to work due to illness or injury.
Income protection for cyclists can provide you with a monthly payment if you're involved in an accident, providing you with peace of mind and time to get better.
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Is there a policy that provides income protection when becoming temporarily unemployed after having been working & with income protection plan cover?
Hi Alf,
Thank you for leaving a question.
This depends on the reason as to why you are unemployed temporarily, but for information you can check our beginners guide to income protection. This page will also give you options on income protection plans available.
Cheers!
Val
I live in Ethiopia i want sponsor
Hi Mustafe,
Thank you for your question.
I understand you are looking for a sponsor to enter Australia. You can find a sponsor yourself, or you can put in an expression of interest using SkillSelect. Lodging an expression of interest in SkillSelect allows Australian employers to see your qualifications and employment history. Employers can then contact you if they are interested in offering you a position. Hope this helps!
Cheers,
Reggie
main isake lie aavedan kaise kar sakata hoon…
haay raahun
ek prashn chhodane ke lie dhanyavaad.
aap us pradaata ke painal se chun sakate hain jis par ham aay suraksha beema ke lie hain.
upalabdh pradaataon ko pradarshit karane vaalee taalika par krpaya apane vikalpon kee sameeksha karen aur tulana karen. ek baar jab aap kisee vishesh pradaata ko chun lete hain, to aap “sait par jaen” batan par klik kar sakate hain aur aapako pradaata kee vebasait par reedaayarekt kiya jaega jahaan aap aavedan ke saath aage badh sakate hain ya aage ke poochhataachh ke lie apane pratinidhiyon ke sampark mein rah sakate hain.
aavedan karane se pahale, krpaya sunishchit karen ki aap sabhee yogyata maanadandon ko poora karate hain aur aavashyak aavashyakataon ke vivaran ke saath-saath sambandhit utpaad prakateekaran vaktavy / niyam aur sharton ke maadhyam se apane vikalpon kee tulana karate samay yah nirnay lene se pahale ki yah aapake lie sahee hai ya nahin. ummeed hai kee yah madad karega!
cheeyars,
regee
Self employed, I took out income protection and Trauma policies in 1994 due to the arrival of first child. The cover was indexed and I accepted the indexation increase upon every policy anniversary.
In 2000, I suffered a mild MCI from which I fully recovered without needing a stent or subsequent surgery. The Trauma lump Sum benefit was paid immediately.
The insurer then advised that my future premiums for the remaining income protection cover would be subject to a 200% loading. On independent advice I continued to accept indexed cover.
In July 2009, I was diagnosed with early onset Parkinson’s Disease at age 51. Medically, I was able to continue running my business for another 5 years whereupon my overall condition had deteriorated to the point where a claim on the policy was approved and I accordingly ceased working and retired in August 2014.
The last annual premium exceeded $13000.00 which prompts my enquiry:
1.Would I have been charged an increase in trailer commission to the agent, and
2.Would I have paid commission on the loading component of the increased premium?
Your response appreciated.
Hi Greg,
Thanks for your question. Although I can’t speak for your specific situation, generally, if you are to use an agent to manage your insurance there is potential for ongoing premiums to be paid as percentage of premium. So if a premium is to increase, there’s a chance the commission increases as well.
Get in touch with your adviser or agent who may be able to disclose their commission structure with you.
I hope this helps,
Maurice
If a person has been treated for cancer more than 5 years ago will this affect pay out.
Hi Lorna,
Thank you for your question.
finder.com.au is a comparison and information service and we are not permitted to provide our users with personalised financial advice or product recommendations.
For clarification on whether you are eligible to receive a full claim or not, please refer to your product disclosure statement or contact your insurer.
All the best,
Zubair
I want to have my income protected in case of illness of family members (my parents) in the UK
Hi James,
Thanks for your question. Unfortunately income protection in Australia will only protects the income in the case of an injury or illness to the person who’s income is insured.
I hope this helps,
Maurice