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Disability Insurance in Australia

Disability insurance can pay a benefit to help you meet a range of costs, such as your mortgage and other bills, if you become badly injured or sick.

Some 4.3 million Australians have a disability. Many will develop their disability soon after birth or later in life. But for those who become incapacitated due to a severe illness or injury, disability insurance can be a lifeline. A payout can bring a great deal of financial peace of mind to you and your family.

What is disability income insurance?

Disability income insurance – or simply disability insurance – is a catch-all for a cover type that pays a benefit if a policyholder has a serious illness or injury.

Disability insurance is often used interchangeably with total and permanent disability insurance (TPD). But, in fact, disability cover can also be baked into trauma cover or income protection insurance. Each of these policies will pay out if you become disabled during your policy's term.

Where can I find disability insurance?

Let's look in more detail at the 3 insurances where disability cover is commonly held: total and permanent disability (TPD) insurance, trauma cover and income protection insurance.

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TPD Insurance

TPD insurance pays a lump-sum if you suffer a permanent injury or illness that means you are no longer able to work. In most cases, you must be off work for at least 3 or 6 months before your claim can be processed.

  • TPD cover is often bought as an optional extra with life insurance.
  • Disability insurance is commonly offered in TPD insurance held within superannuation. In fact, 86% of the 9 million Australians who hold TPD cover do so via their super fund.
  • An insurance policy held within super won't be fully underwritten; instead, they're offered on shared or group terms. This can be a barrier for claimants in some circumstances.

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Trauma insurance

If you get seriously ill or are recovering from a severe injury, trauma insurance can pay you a lump sum. Typical injuries that trauma insurance can cover include the loss of limbs after a car accident, or major burns.

  • Trauma insurance, sometimes called critical illness insurance, is generally not held within superannuation.
  • It is offered as an optional extra with life insurance by three-quarters (12 out of 15) of the brands compared on Finder.
  • Trauma cover pays up to $2 million as a lump sum if you get diagnosed with an illness that's listed in your PDS – as many as 50 conditions might be included.

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Income protection insurance

Income protection can be thought of as insurance for your salary. It pays a monthly benefit if you become sick or injured and can no longer work.

  • Income protection insurance will pay some of your lost income if you're unable to work because of a disability due to illness or injury.
  • It will usually cover a maximum of 70%-85% of your pre-tax income. Most commonly, the benefit period is restricted to 2 or 5 years - or until you turn 65 in some cases.
  • Just 35% of Australian said they'd be able to last more than 3 months if they lost their job tomorrow, according to Finder research.

Finder survey: What prompted Australians of different ages to take out TPD insurance?

Response65-74 yrs55-64 yrs45-54 yrs35-44 yrs25-34 yrs18-24 yrs
Buying a home0.57%1.74%0.52%5.58%0.46%
Getting older (but not retiring)0.57%2.91%2.07%1.02%0.92%
None of the above0.57%1.74%4.66%4.57%2.75%1.03%
Starting a new job0.57%2.33%0.52%1.52%2.29%1.03%
Starting my own business0.57%0.51%1.38%1.03%
Moving home0.58%0.46%
Having a baby3.11%6.09%1.83%
Getting married1.55%2.54%0.92%1.03%
Retirement0.51%
Buying a car1.03%
Source: Finder survey by Pure Profile of 1110 Australians, December 2023

Income protection calculator: How much cover you could get

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How much disability insurance do I need?

This is for you to decide based on your finances and personal circumstances. A good general rule of thumb is to ensure any life insurance covers at least 10 times your salary.

Be aware, the cover level of your disability insurance may be linked to your life insurance. If your cover is linked – this often happens if it's bought at the same time – then your disability cover will either be the same or less than the benefit limit of your life cover. Alternatively, you could opt for standalone TPD insurance.

If I have worker's compensation, do I still need to consider disability insurance?

Yes. Even if you're protected by a workers' compensation scheme, any payouts may well fall short of your ongoing costs after suffering a long-term disability. This insurance, which is compulsory for employers, is more set up to cover lost wages, medical expenses and rehab.

Also, disability cover will insure you if you're injured or are diagnosed with a serious illness outside of work. This isn't true of workers' comp.

What is covered by the NDIS?

The NDIS, or National Disability Insurance Scheme, can offer you funding if you have a disability that is severe and is likely to be permanent. The national programme helps those with a disability to meet a range of expenses. This could to pay for a wheelchair, or make modifications to a disabled person's car or home.

With disability insurance, it's worth keeping in mind you may be eligible for a payout even if your disability is temporary. You are also able to use the benefit payment in any way you see fit – such as to pay rent or bills or maintain your family's lifestyle.

1 - 6 of 12
Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Minimum Entry Age Sum Insured
TAL Accelerated Protection Income Protection
$30,000
Up to 70%
Up to
Age 65
18
$1,305 million
Get up to 70% of your income covered with flexible short and long term benefit periods.
AAMI Income Protection
$10,000
Up to 75%
Up to
5 years
18
$222 million
Take out a new AAMI Income Protection policy and get $100 eGift card after your first 4 months of cover. T&Cs apply. Ends June 30, 2024.
ahm Income Protection
$10,000
Up to 70%
Up to
5 years
18
Data not available
Get 10% off your first year of ahm Income Protection when you apply by 1 July 2024. T&Cs apply.
NobleOak Income Protection
$30,000
Up to 70%
Up to
Age 65
18
$65 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.
Medibank Income Protection
$12,500
Up to 70%
Up to
5 years
18
Data not available
Save 10% on your first year of Medibank Life Insurance when you apply by 1 July 2024. T&Cs apply.
Insuranceline Income Protection
$10,000
Up to 75%
Up to
5 years
18
$222 million
Protect your family with an Insuranceline policy and you can go into the draw for a chance to win a $1,000 gift card. New Customers only, T&Cs apply. Competition entries close on 31 July 2024.
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