20-year-old

Income Protection for 20 Year Olds

Although you are young, income protection can be a key consideration.

Being in your twenties might seem like an early age to start thinking about income protection insurance, but as this guide reveals, you’re never too young to start planning for your future and protecting yourself from life’s unexpected curve balls.

Should I get income protection in my twenties?

Illness and injury can befall anyone at any time regardless of your age. This is why considering income protection insurance is a good idea. Remember, illness and injury can befall anyone at any time regardless of your age.

Income protection insurance pays up to 75% of your current wage if you are unable to work due to sickness or accident. If you have a good job, protecting your income will ensure you can continue to pay your bills, maintain your current lifestyle and continue saving for your future financial independence.

Your twenties are the period in your life when you are starting to find your financial feet. You are in the early stages of a career and the likelihood of a family and a mortgage are on the horizon. Protecting your income during this vital stage will ensure your wealth building isn’t cut short through circumstances beyond your control.

Pros and cons of getting cover in your twenties

There are some clear advantages to taking out income protection in your twenties:

  • It is significantly cheaper to buy when you are young and healthy, particularly if you are planning on holding the policy for many years.
  • It has financial advantages, including adding to your equity (financial worth) and making loans easier to obtain.
  • You can claim a tax deduction for your income protection premiums.
  • You will protect any savings or investments you have accumulated so you won’t have to use them to pay for daily expenses.

There are a few disadvantages to having income protection insurance in your twenties:

  • You might be living at home and attending university, in which case you have no income to protect.
  • You may not be able to afford it if you are still on a low wage (in which case you could investigate whether you have it by default through your superannuation).

Compare income protection direct from these brands

Name Product Maximum cover Maximum Entry Age Minimum Sum Insured Guaranteed Future Insurability Expiry Age Short Description
$1,000,000
64
$100,000
No
No expiry age as long as premiums are paid
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™.
$1,500,000
65
$3,000
No
80
Choice of cover options and flexible premiums to suit your budget. No lock-in contracts and fast application.

$15,000,000
69
$0
Yes
99
Protect your family with NobleOak’s Life Insurance cover. Plus, pay no premium for 2 months with combined cover. T&C’s apply.
$1,500,000
65
$100,000
Yes
99
Tailored life insurance so you know what you're covered for upfront. Take out a policy and get a $100 bonus gift after holding cover for 2 months. Ends 31 March 2019.
$1,500,000
69
$50,000
Yes
99
Receive a 10% discount on the second person when two applications are submitted at the same time, and both policies are issued.
$1,500,000
64
$100,000
No
No expiry age as long as premiums are paid
Cover up to $1.5 million with Guardian Life Insurance.
$2,000,000
74
$100,000
Yes
99
Join Qantas Life Insurance and earn up to 150,000 Qantas points. T&CS apply including minimum premium and policy hold periods apply to earn points.
$1,500,000
65
$100,000
Yes
No expiry age as long as premiums are paid
Go into the draw to win (1 of 10) $1,000 eftpos gift cards when you get a quote for Medibank Life Insurance. T’s and C’s apply.
$1,000,000
65
$100,000
No
No expiry age as long as premiums are paid
Receive one month's premiums off every year if you pay annually upfront. T’s and C’s apply.
$2,000,000
59
$50,000
Yes
99
Get flexible life insurance up to the sum of $2,000,000.

Compare up to 4 providers


What factors should I consider before getting a policy at this age?

How the following factors relate to your individual circumstances will help you determine how much income protection insurance you need and can afford.

Your occupation

Insurers will determine your occupation’s level of risk and charge accordingly for your premiums. Your occupation will either be a standard risk occupation (no specific workplace hazards) or special risk (involving hazardous daily tasks and exposure to risks that can affect your physical or mental health).

How much you earn

Another factor insurers will take into account is how much you earn. If you are a white collar professional, your level of income will be higher and more expensive for insurers to cover. This is partly why income protection insurance is limited to 75% of your wage. Your insurer wants to encourage you to return to your occupation as soon as possible. Obviously, a high salary will translate into higher premiums for your cover.

Your health

A third factor that may affect the cost of your income protection insurance is your health. While medical and blood tests are often not required, your insurer may ask you a series of health-related questions and if it emerges that you have pre-existing medical conditions or a family history of disease, your premiums and level of cover may be affected. Generally though, as a person in your twenties, health issues will not be a major influence on price.


If I do get income protection now, will I be able to hold that rate until I get old?

This depends on whether you choose stepped or level premiums. Stepped premiums start out relatively cheap in your early years and get more expensive as you get older. The advantage of stepped premiums is that insurance is more affordable when you’re young and on a low salary and still quite manageable in your later years when you are earning a great deal more.

Level premiums

Level premiums on the other hand, start out higher than stepped premiums and continue at the same rate every year. So, if you can afford them now, you will certainly be able to afford them later on as they won't go up, apart from indexation, which is an annual CPI rise of around 5% p.a. to keep pace with inflation.

Stepped premiums

If you’re short of cash now but envisage a high salary down the track, stepped premiums could be for you and level premiums may be the answer if you’re looking to maintain approximately the same premium rate throughout the life of your policy.

Compare income protection quotes

Picture: Shutterstock and Icons made by www.flaticon.com

Maurice Thach

An insurance researcher and writer for finder.com.au who loves finding an answer to the question "Am I covered for ________?" Maurice has also completed a Tier 1 Life Insurance and a Tier 2 General Insurance Certification under ASIC's Regulatory Guide 146. This means he can confidently provide general advice for life insurance and non-life insurance products.

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