⚡️⚡️⚡️
With energy prices rising, switch to a cheaper plan
💡
Compare Prices Now
⚡️⚡️⚡️

Income protection insurance: A beginner’s guide

Income protection insurance can help replace your salary if you get sick. Here's what it does and doesn't cover.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

Income protection is as simple as it sounds – it's insurance for your income. If you can't go to work because of sickness or injury, income protection will pay you a monthly benefit to replace your salary while you're out of action.

What is income protection insurance?

Income protection insurance is a monthly benefit paid to replace your income, if you're unable to work due to illness or injury. Typically, payments are between 75-85% of your normal income. If you earn $5000 per month before tax, your benefit would be 75–85% of this, so around $3,750–$4,250. This payment is taxed at standard income tax rates.

How does income protection work?

Income protection insurance pays a monthly benefit if you're unable to work due to illness or injury. Basically, it's a stand-in for your regular earnings, so you don't fall behind on the bills, and the payments are made for between a few months and many years, depending on your policy.

The money you receive is yours to use as you please, but it's designed to help you cover everyday household bills while your ability to earn an income is impacted.

If you want to claim on an income protection policy, you'll have to serve a waiting period first. This is the length of time between your first day off work and when you're eligible to claim. You select the waiting period when you first take out your income protection policy, and it's usually between 2 weeks and 3 months. The shorter the waiting period, the more expensive your policy will be.

If you pass the waiting period and you're still unable to work, you'll then have to prove that your inability to work is due to illness or injury. This will typically be in the form of doctor's notes and may include communication with your employer.

If you meet the waiting period and have proof of your inability to work, you will then receive monthly payments from your insurer.

Which Australian brands offer income protection?


The comparison below shows Finder partners offering income protection and some of the key benefits.

1 - 7 of 8
Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Average Claims Acceptance Rate Average Claim Time Sum Insured Apply
AAMI Income Protection
$10,000
75%
Up to
5 years
87.20%
2.1 months
$211 million
If you’re an existing AAMI customer, you can save 5% on income protection. New customers can get one month free by paying annually.
Insuranceline Income Protection
$10,000
75%
Up to
5 years
87.20%
2.1 months
$211 million
Get 12 months cover for the price of 11 months if you pay annually. T&Cs apply.
Suncorp Income Protection
$10,000
75%
Up to
5 years
87.20%
2.1 months
$211 million
Sign up and become a member of Suncorp Benefits. Access savings of up to 15% from major retailers. Existing members can get a 5% discount off their policy.
TAL Income Protection
$30,000
70%
Up to
Age 65
87.20%
2.1 months
$211 million
Get up to 70% of your income covered with flexible short and long term benefit periods.
NobleOak Disability Income Insurance
$30,000
70% for the first 24 months, 60% thereafter
Up to
Age 65
Data not available
Data not available
$59 million
With NobleOak, you can lock in a policy with a benefit period covering you up to the age of 65. Cover limits may go as high as $30,000.
RAC Disability Income Insurance  (Only available in Western Australia)
$30,000
70%
Up to
Age 65
Data not available
Data not available
$59 million
When you purchase RAC Income Protection, WA residents receive complimentary RAC membership which includes access to discounts on fuel, savings on shopping, entertainment and more. T&Cs at rac.com.au.
Commbank Income Protection by AIA Australia
$10,000
70%
Up to
2 years
94.5%
Data not available
$13 million
Get flexible income protection cover, up to 75% of your income. Including access to the AIA Vitality program's ongoing discounts and perks.
loading

Compare up to 4 providers

What does income protection cover?

These are some of the common things you'll be covered for and also what is generally excluded under income protection insurance:

  • Prolonged illness
  • Total disablement
  • Severe partial disablement

What income insurance does not cover

  • Illness or injury lasting less than the policy's waiting period
  • Voluntary resignation from work
  • Pre-existing conditions
  • Typical pregnancy.

Example: Germaine returns to the workforce smoothly.

Here's an example of what might happen when you access income protection.

Germaine is a 56-year-old legal professional. When she was diagnosed with breast cancer, she was unable to work. Being unable to earn any income along with treating her cancer, Germaine was facing an uphill battle. Luckily for Germaine, she had an income protection policy that would cover up to 75% of her income. With this cover, Germaine was able to take time off and recover.

Eventually, Germaine was able to return to the workforce part time. Her insurance policy allowed her to switch to a partial benefit to cover the days when she is not working.

Tips for using income protection

  • Maintain your relationship with your insurer by doing all they require. For example, your insurer might require you to see a medical practitioner to maintain your status.
  • Be super accurate with updates to avoid putting yourself in "pre-disability" status. If you don't provide an insurer with the right information, you could find yourself in a situation where you're not covered.
  • Questions are key. Ask lots of questions about how your cover works to see how you can customise it.

How to make an income protection insurance claim

To make a claim to your income protection policy provider, you'll need to provide evidence of your illness or injury. Calling your provider to see what evidence they need can speed up the process and prevent delays.

Some of the information you usually require includes the following:

  • Your policy number
  • The date your symptoms or health problem started
  • When you stopped working
  • Any medical forms from your doctor
  • Copies of medical tests if relevant
  • A Medicare authority form so that your insurer can gain access to medical forms and information

Other things to know about income protection

If you have any income protection questions left, here are some final things to consider:

  • Workers compensation does not replace income protection. Just because you are covered by workers compensation does not mean income protection isn't useful. Workers compensation will only help you if you are injured in a work-related incident, while income protection can apply all the time, anywhere, and usually has fewer requirements to claim.
  • You can take out cover through your superannuation. Income protection cover through your superannuation fund is generally cheaper than a standalone policy, but will not offer the same level of cover. Learn more about the pros and cons of taking out income protection through your superannuation.
  • Your premiums are tax deductible. When you take out an income protection insurance policy, premiums are 100% tax deductible. This is generally not the case if your cover is paid through your superannuation.
  • Some insurers offer day-1 accident cover. Some policies provide cover straight away if you're injured in an accident and unable to work, with no need to serve a waiting period.
  • You are covered 24/7. Income protection insurance covers you 24 hours a day, 7 days a week, no matter where you are in the world.

Frequently asked questions

Picture: GettyImages

More guides on Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.

8 Responses

  1. Default Gravatar
    SandeeDecember 1, 2021

    If i am on income protection, do i still pay superannuation contributions and how much?

    • Avatarfinder Customer Care
      JamesDecember 8, 2021Staff

      Hi Sandee,

      This depends on your circumstances. You can find out more from your policy’s Product Disclosure Statement (PDS), or reach out to your provider to enquire about your benefit in more detail.

      I hope this helps.

      Regards,
      James

  2. Default Gravatar
    DAugust 26, 2021

    What if you pay for income protection until the age of 65 (either privately or through superannuation) & never needed to claim it by that age?! What will happen to all that money you paid all those years for your income protection!?

    • Avatarfinder Customer Care
      JamesAugust 30, 2021Staff

      Hi D N,

      When an income protection policy expires, a portion of the policy’s premium becomes what is known as ‘Earned Premium’. This is the amount collected by an insurance company for the portion of a policy that’s expired. When the policy expires, the insurance company can then record the paid premiums as earned or as a profit.

      To know more about income protection, you can request to speak with a life insurance broker by submitting this form → https://www.finder.com.au/income-protection-insurance-brokers.

      Keep in mind that standalone income protection is often set up differently to the cover you find within super funds. You can reads more on this in our guide: https://www.finder.com.au/superannuation-life-insurance

      I hope this helps,

      Regards,
      James

  3. Default Gravatar
    SteveJuly 14, 2019

    I will need to get both my hips replaced at different times. The dr said ill need 6 wks off and my income protection comes in after 30 days. My question is once it comes into affect do I start getting money from day 31 onward or do start getting it from day 31 bur also backdated to day 1? Does that make sense ? I don’t know how as the bread winner of the family how ill pay for mortgage on house and shop rent and expenses for a month without borrowing money off parents and would need to pay it back

    • Default Gravatar
      NikkiJuly 15, 2019

      Hi Steve,

      Thanks for your question.

      I understand your current situation especially since you are the breadwinner of the family.

      Make sure your claim is backdated to the original date you are diagnosed. To accurately know the effective date of your income protection, the best way to do it is to reach out to your provider.

      Hope this helps! For any further questions, feel free to reach out to us again, we’re here to help.

      Best,
      Nikki

  4. Default Gravatar
    JEFFJune 19, 2019

    WILL I GET ANY INCOME PROTECTION ASSISTANCE WHILE I AM ON SICK LEAVE

    • Default Gravatar
      NikkiJune 20, 2019

      Hi Jeff,

      Thanks for your inquiry.

      Sick leave is designed to provide for situations which are short in duration. If you have income protection, income protection provides cover in case you cannot perform your usual occupation as a result of sickness or injury. Note that the duration of cover depends on your income protection policy but typically sick leave provides only limited coverage for time off work due to sickness. Generally, you only have around 10 days of paid leave per year linked to the government scheme – that’s for full-time employees.

      Hope this helps! For any clarifications, feel free to message us again.

      Best,
      Nikki

Go to site