It may not be the most glamorous topic in the world, but when it comes to throwing you a lifeline when it matters, it really does pay to know about income protection insurance. Unfortunately, though, according to a recent Finder study, 58% of Australians are still in the dark about what income insurance covers, with many confused about whether redundancy and pregnancy are automatically included.
We've put together the key stats and facts about income protection insurance.
The main takeaways
Less than half (42%) of participants could correctly identify what income protection covers. This is the equivalent of more than 11 million Australians.
17% of respondents falsely think that income protection will cover them if they get fired.
One in 10 Australians admit they don't even know what income protection is.
One in 4 Australians (22%) think redundancy is automatically included in income protection plans. In reality, it's sometimes offered as an optional extra.
How well do you understand income protection?
Every month, we ask Australians how well they understand income protection. Throughout 2018- 2019, we found that only 37% said that they understand it quite well, but that was followed closely by many admitting that they only understand it a little bit (31%) and just 23% said they understand it perfectly.
Which of these do you think income protection covers you for?
One of the big questions over income protection insurance is what does it actually covers you for? Most (65%) people correctly know that income protection covers you if you're ill or injured and unable to work. Not all policies, in fact very few, will cover you for involuntary redundancy and most will not cover you if you get fired.
What we know by generation
The younger generations are more in the dark about income protection than older groups, with nearly two-thirds of generation Y unaware of what it covers. Here are some of the main takeaways from the survey, broken down by generation:
Nearly two-thirds (65%) of generation Y are unaware of what income protection covers, compared to half (50%) of baby boomers.
One in 4 millennials (22%) wrongly believe they are covered by income protection if they get fired.
23% of generation Z (ages 18-23) don't even know what income protection is, compared to 7% of generation X.
8% of generation Y wrongly believed it replaced lost earnings during pregnancy
Managing your income
What bill or expense causes you the most stress? We asked and got over 15,000 responses. Here's what you said.
It's not surprising to see mortgage and rent at the top of the list, since it's almost always our biggest expense. But for most of us, the stress isn't over paying our mortgage or any other expense for that matter; it's about not being able to pay for them. It's about the what-ifs, such as what if you fall ill, get injured or you lose your job. Income protection can't stop these things from happening, but it can pay the bills if they do.
What are the most common income insurance claims?
According to CommInsure, most income insurance claims are for accidents, not illnesses. Unlike workers compensation, income protection can cover you if you injure yourself inside or outside of work. Musculoskeletal and mental health claims were the second highest. Other conditions made up 60% of claims.
Why you can trust Finder's income protection experts
We're free
You pay the same as buying directly from the insurer. We make money from referral fees when you choose a policy, but you don't pay any extra.
We're experts
Our team of income protection experts have researched and rated dozens of policies as part of our Finder Awards and published 80+ guides.
We're independent
Unlike other comparison sites, we're not owned by an insurer. Our opinions are our own and all guides must meet our editorial standards.
We're here to help
Since 2016, we've helped thousands of Australians find income protection by explaining your cover options, simply and clearly.
Frequently asked questions
Income protection can be worth it if you or your dependents rely on the income you earn and would suffer financially if you can't work due to an accident or illness. Income protection can protect you with regular payments of up to 70% of your gross salary until you're fit to return to work and some policies offer additional benefits to help you back on your feet.
Most income protection policies pay up to 70% of your pre-tax income. They also have a benefit period of two to five years and a maximum benefit, usually around $10,000 monthly.
Yes, you can have more than one income protection policy. In some cases, you'll be paying extra when you're unlikely to be able to claim the full benefit on both. Many insurers set a maximum benefit you can receive and this usually amounts to less than 100% of your income.
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146).
One of the benefits of income protection insurance is that you may have the ability to claim a tax deduction on your premium benefits. Find out if the same rules apply for policies inside super.
Income Protection has specific features designed for dentists including needlestick cover.
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