Ready to receive a quote for income protection? Find out how to compare the prices you get
Income protection insurance offers a financial safety net for you and your family. If you suffer an injury or illness and are unable to work, income protection cover offers an ongoing monthly benefit to replace your regular income. Most income protection policies replace up to 75 per cent of your pre-disability income, and you can use the benefits you receive just as you would use your normal salary - to pay off the mortgage, pay off credit card debt and generally deal with all the expenses of day-to-day living.
Price definitely isn’t everything when comparing income protection options. There's no point going with the cheapest option if it doesn’t provide you with the cover you actually need. Saying that, you still need to find cover that measures up to what you are paying so comparing quotes before you buy is still crucial.
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- How can I get an income protection quote?
- What factors affect income protection quotes?
- Aside from price, what else should I consider when comparing income protection quotes?
- What are some key features worth considering for my income protection policy?
- Can I get an idea of what it could actually cost me?
- What information will I need to provide?
- Ok, I’ve got some quotes...now how do I actually choose?
- What can I do to reduce my quote?
- Questions you still might have about getting income protection quotes
How you source and compare income protection insurance quotes varies depending on your approach to buying cover. You can either:
- Buy a policy through an adviser. If you want expert advice tailored to your insurance needs, you can opt to buy income protection cover through a financial adviser. Your adviser will help you research a range of policies that suit your needs and provide the assistance you need to compare income protection quotes.
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- Buy a policy direct from an insurer. If you’d rather take a faster, simpler approach to obtaining cover, you can buy income protection insurance direct from a life insurance provider. It’s easy to compare direct income protection quotes online - most providers offer quick quotes via their website or over the phone. All you have to do is provide a few basic personal details and the level of cover you want.
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- Premium options. Income protection insurance is available with either stepped, level or hybrid premiums. Stepped premiums start out lower but increase each year as you age, while level premiums start out at a higher level but remain consistent year after year. Hybrid premiums start out stepped for a fixed period, for example 10 years, and then transition to level premiums.
- Agreed value or indemnity value cover. Under an agreed value policy, the benefit you stand to receive is based on the amount of income you and your insurer agree that you earn at the time you apply for cover. Under an indemnity value policy, your benefit amount is calculated based on the evidence you provide to prove your income at the time you make a claim. While income protection quotes are affected by a range of factors, indemnity value policies are typically cheaper.
- Your age. Regardless of the premium structure you select, your insurer will take your age into account when determining the cost of premiums. The older you are, the more you will pay for cover.
- The waiting period. The waiting period is the time you must wait after becoming disabled before your policy will start paying benefits. The shorter the waiting period you select, for example 30 days instead of 60 days, the more your cover will cost.
- The benefit period. This is the amount of time for which your policy will offer benefits. The longer the maximum benefit period you select, for example two years instead of one year, the higher your income protection quote will be.
- The level of cover you select. The higher the benefit amount you will receive when ill or injured, the more your cover will cost.
- Your occupation. Certain high-risk occupations increase your chances of making a claim and therefore lead to cover costing more.
- Your lifestyle. If you’re a pack-a-day smoker or an adrenalin junkie always participating in adventure activities, expect your income protection insurance quote amounts to increase.
- Your medical history. If you’ve got a pre-existing medical condition and a history of health problems, the cost of cover will most likely increase.
- Your gender. Premiums are generally higher for women than men due to a range of factors, including breast cancer and complications following pregnancy.
- The definition of disability applied. There are different definitions of disabilities applied to income protection for when you are eligible to claim. Each with different pricing applied:
- Duties based: Full monthly benefit paid if you are unable to perform income producing duty and are not working. All other policy conditions must be met for a full benefit to be paid.
- Income based: Benefit paid if you suffer a reduction in your pre-disability income as a result of the injury or illness suffered. All other policy conditions must be met for benefit to be paid.
- Hours based: Benefit paid if you return to work but are only able to work a certain number of hours each week. This means a full benefit will be paid and you are still able to have some income coming in.
There are literally hundreds of income protection policy options available on the Australian insurance market, each designed for different buyers with different needs. It is essential for each buyer to carry out their own assessment of what will need to be covered in the event that they are forced to take time off work due to serious injury or illness. This involves gaining a clear understanding of the different features provided on a policy and if they are really relevant to your situation. Cutting back on expensive extras that are not necessary can save you thousands over the course of the policy: Here are some key considerations to make before looking at different policies.
Personal situation and budget
This involves making an assessment of what will need to be covered in you were forced out of work. Applicants should consider;
- If your spouse would be forced to take time off work to assist you recover and how this may affect the combined household income.
- If Child Care would be required.
- Rehabilitation expenses that may be incurred as a result of your injury.
- Reduction in spending needed due to reduced income stream (Most Income Protection benefits will only provide 75% of cover).
The type of policy: Comprehensive or basic
There may be other possible avenues to fall back on in the event of serious illness or injury. You could have money put aside in a high interest saving account especially setup for such an occasion. You could fall back on taking any annual leave you have owing to you or any long service leave that may be due. Income protection insurance is designed to take over when these other options have been exhausted. It is important to consider your own budget against the different policies available. While a basic plan may not offer the same level or protection, it may still provide an adequate level of cover for your situation and at price more within your budget. Assess what extra benefits could provide needed support if you were forced out of work i.e. Child Care, Business Expenses Benefit.
Agreed value or indemnity
Agreed Value is where you pay the same price each month for as long as you are able to work. Agreed value on your income protection insurance is basing your benefit on income using a specific percentage of your current income with the ceiling of 75%. Agreed Value can be a good option for self employed workers with fluctuating incomes as it will ensure the right level of cover is provided regardless of current income. One can also choose to receive the indemnity value of the insurance where your benefit is based on financial evidences that you present at the time of claim.People who have no trouble proving their income (regularly provided with payslip) can benefit from the more affordable indemnity option.
Stepped, hybrid or level premiums
Premium payments can either be structured as stepped level or premiums. Each applicant should consider what is most suitable for their budget and the nature of their income stream when choosing what option is best.
- Stepped: Premium payments will start off quite low but increase overtime. Can benefit people without as much budget for cover in the earlier stages of their life.
- Level: Will stay the same throughout the entire policy term. Best for people who would like to know exactly what their payments will be.
- Hybrid: Will start off as stepped but transition to level after a period of 10 years. Greater flexibility for the policyholder.
Selection of waiting period and deferment period
Waiting period is the amount of time you are willing to wait until you start accumulating and claiming your benefits. There are a numbers of days that you can select from which will serve as your waiting period, for example 30 days, 90 days or more. In order for you to decide this period, you need to consider if you have enough personal savings to cover your monthly expenses or if your paid sick leave from your employer will allow you to momentarily forgo your claim and wait for a while. The longer the waiting period, the greater savings you will have in terms of the insurance cost, hence resulting in a lower income protection quote. Deciding on the benefit period which is appropriate for you. A benefit period is the length of time that you want your benefit to last after the waiting period. Common benefit periods are 2 years, 5 years or up to age 65. This will again influence your policy price when you get online income protection insurance quotes. Since you do not know the length of time that your work shall be hampered by a sickness or injury, it is often better to opt for a longer period of cover.
Your income protection quotes can differ greatly between different insurers even when the cover being quoted on is quite similar. For this reason it's most important you know exactly what's provided for in the policy before you go ahead and accept the cover with the cheapest premium quote. A full comprehensive cover may include benefits you don't really need, it's therefore well worth the time to consider if you actually need all the following extras:
- Day one accident cover - This extra will protect you from the very first day your income protection policy is approved if you are involved in an accident. It waives the normal waiting period. A handy option but it may also add to your cost.
- Specified injury and illness benefit – This add-on will pay a benefit if you suffer from any of the specified illnesses or injuries listed in the policy such as; stroke, heart attack, cancer, broken bones etc. even though you can still continue working.
- Elective surgery – An extra will pay the cost of any injury sustained when undertaking cosmetic or elective surgery.
- Bed confinement – An add-on that will pay benefits immediately you're confined to a hospital bed therefore avoiding the waiting period.
- Accommodation and travel assistance – This feature will pay the accommodation and travel expenses for family members to visit you while you are disabled, sick, or injured, anywhere in the world.
- Family care – An extra that can be purchased to pay a family member to look after you while you are recovering.
- Home care – A feature that can be added to pay the costs of a full time carer to look after you while you're ill.
- No claim bonus – A means by which you can have your cover increased at no cost to yourself if you've exceeded a prescribed period without making a claim.
- Rehabilitation incentive- An extra that can be added to your income protection quote that'll help pay the costs of your rehabilitation.
- Guaranteed future insurability – A feature that guarantees your cover can be increased as you income grows.
- Increased claims benefit – This is an important add-on as it allows for an increase in benefits to be paid in line with any CPI increase after a successful claim has been made and benefit payments have started. This is particularly useful if you have a long term benefit paying period such as to age 60 or 65. Without it you would receive the same benefit payment throughout the benefit paying period, which, after a while, would get eaten up with cost of living increases.
Below is an sample quote obtained for AIA Income Protection. Please note that this is only to be used to provide a general idea of pricing without considering other factors such as pre-existing medical conditions, waiting period or benefit period.
|Quote 1||Quote 2|
|Occupation||Marketing/Sales Manager||Marketing/Sales Manager|
|Annual Pre-Tax Income||$85,000||$85,000|
|Monthly Benefit||$34.53 p/m||$61.76 p/m|
The range of information you’ll need to provide in order to get an income protection quote will vary according to whether you want to buy cover direct or with advice, and also depending on the level of underwriting attached to your policy. You will generally need to provide:
- Your full name and contact details
- Your date of birth
- Your gender
- Your smoking status
- Your industry and occupation
- Your income details
- The benefit amount you want (if you’d like to receive a benefit equivalent to less than 75 per cent of your regular income)
- The benefit period and waiting period you would like applied
Case Study: Kevin Compares His Income Cover Options
Kevin is a carpenter/handyman who earns $60,000 a year and relies on good health in order to be able to continue working. Aware that he will struggle to keep up with his mortgage repayments should be fall ill or suffer a serious injury, Kevin decides to shop around for an income protection insurance policy. After carefully considering his cover needs, including the waiting period and benefit he wants,
Kevin finds five direct insurance policies that offer the financial protection he requires. He obtains a quote from each insurer online to see how they each stack up against one another. As all of the five policies meet his cover needs, Kevin decides to purchase the policy with the cheapest quote, which allows him to save more than $100 when compared with the most expensive income protection insurance quote he receives.
It’s important to remember that cost is far from the only thing you should consider when comparing income protection quotes. The premium amount is obviously going to be a major factor in your final decision, but it’s vital to be sure you’re purchasing a policy that represents excellent value for money.
- Some other important factors to consider include:
- What level of benefits does it offer?
- What is the maximum I will be paid per month in the event of a claim?
- Can you adjust the policy closer to your needs with additional benefits?
- Does the policy have indexation applied so it will keep up with inflation?
- Does the policy include Guaranteed Future Insurability so you can increase your premiums further down the track without having to undergo additional underwriting?
- Are there any exclusions or restrictions you should be aware of?
You should also take the time to understand how much cover you need. Consider the ongoing expenses you need to manage and how you would be able to cope from a financial perspective if you couldn’t rely on your income. Once you know the type and amount of cover you need, you can make an informed choice about the right policy for you.Back to top
While it’s crucial to ensure you get a policy that meets your cover requirements, there are a number of steps you can take to reduce what you will pay for cover. Some of these include:
- Choose a basic policy without a high-level of additional features
- Choose a shorter benefit period and longer waiting period. Consider what other benefits you can fall back on from other insurance or your employer. Do you have any sick leave or annual leave accumulated that you could use if forced out of work?
- Choose a stepped premium structure if you are comfortable paying more for cover later.
- Choose a reduced monthly benefit. You may not feel like you actually require the maximum of 75% of your income if you are forced to take time off work.
Q. Is it cheaper to buy cover direct or to buy through an adviser?
- A. In many cases it is cheaper to buy income protection cover through a financial adviser because you can find a policy that is specifically tailored to suit your needs and underwriting is completed at the time of application.
Q. What are the benefits of buying income protection cover direct from an insurer?
- A. Some of the benefits of buying direct include a quick and easy application process, no medical tests, simple-to-understand policies and the ability for high-risk applicants to get some form of cover in place.
Q. What are the benefits of buying income protection cover through an adviser?
- A. The main advantage of using an adviser is that you can rely on an expert to help you determine your cover needs, find and compare a range of suitable policies and apply for cover.
Q. Do I need to undergo medical tests in order to get an income protection quote?
- A. No, but you will usually need to answer a few basic health and lifestyle questions. If purchasing through an adviser, your quote may change based on your pre-existing medical condition.
Q. How much income protection cover do I need?
A. You’ll need to consider a range of factors in order to determine how much cover you need, including your income, your ongoing expenses, the number of dependants you have and the amount of money you have saved.
Q. How long does it take to get an income protection quote?
- A. The time is takes to get a quote will vary on the amount of information your insurer requires, but it is possible to get a quote from some providers in as little as a minute.
Q. Why is it beneficial to take out income protection cover at a young age?
- A. As younger applicants are generally prone to fewer health risks than older people, you will usually pay lower premiums. You will also usually be able to take out a higher level of cover at a later date without undergoing further medical underwriting.
Q. Are income protection premiums tax-deductible?
A. Yes, income protection premiums are tax-deductible in the vast majority of cases.