How much does income protection insurance cost?
Compare the average cost of income protection insurance in Australia.
Income protection is generally paid monthly, and it's often just 1 or 2 per cent of your salary. The cost you pay will vary based on your salary, age, medical conditions, the type of work you do and a few other factors.
To give you a starting point of how much you can expect to pay, Finder researched average costs across Australian brands for both men and women. Prices and benefit payouts are based on a 35 year old, non-smoking office worker with no pre-existing conditions listed. Quotes checked across 8 brands in December 2019.
|Monthly income (Pre tax)||Average cost per month (male)||Average cost per month (female)||Monthly Payout Range|
|$5,000||$38.61||$54.27||$3,750 - $4,000|
|$6,000||$47.33||$66.60||$4,500 - $5,000|
|$10,000||$72.23||$101.34||$7,500 - $8,000|
|$14,000||$90.82||$125.81||$10,000 - $10,500|
Get an affordable quote for income protection insurance
We get speaking to someone you don't know on the phone isn't fun. Here's why it's worthwhile:
- 100% free - there's no obligation to sign up
- Can help you make sense of your policy e.g. how long you can cover you income for
- Guide you through the application process correctly
- Tailor a policy to your lifestyle and expenses (this can reduce the price you pay)
What's on this page?
What you pay for income protection is based on a number of factors used by insurers to determine the level of risk you carry. These include:
- Age: Premiums will increase with age because you are more likely to be susceptible to medical conditions.
- Your gender: Women are generally considered to be more susceptible to pre-existing medical conditions such as heart problems and pregnancy complications.
- Whether you smoke: You may pay as much as 50% more for income protection insurance if you are a smoker. You can have your premiums changed to reflect non-smoker status if you have not smoked for 24 months.
- Pre-existing medical conditions you have: An insurer will need to know the nature of your condition and any current treatment you are currently receiving. There are conditions that will be excluded automatically and others that you may receive cover for if more information is provided.
- Your occupation and how dangerous it is: This will also depend on the actual duties carried out on your occupation and their perceived level of risk.
- Lifestyle factors: Potentially dangerous hobbies such as dirt bike riding or hang-gliding may result in an increase of the premium.
- The waiting period you choose: A shorter waiting period will result in a higher premium.
- Benefit period you choose. The longer your benefit period the higher the premium.
- How often you pay your premium: Paying your premium annually as oppose to monthly will usually bring a discount.
In the example below we take a look at various occupations with different income levels. As shown, both occupation AND income can affect the cost of cover. For example, a retail supervisor and a registered nurse who earn $4,000 a month will pay a different premium on income protection.
Likewise, a medical specialist may have a higher income to insure than a general doctor. This, along with the occupation category can mean a difference in premiums.
|Income**||Average monthly premium*|
|Specialist Medical Practitioner||$15,000||$220.54|
|Machinist (Metal or Wood)||$4,000||$154.57|
|Building Industry, Supervisor||$4,000||$115.73|
*Average monthly premium is based on the average premium of all policies available in finder's quote engine for both males and females. Quotes are based on non-smoking 35 year old in NSW. Income levels are for illustrative purposes and not as a definitive guide.
While it’s important to ensure you have adequate cover when you take out Income Protection Insurance, there are still ways you can save money and reduce the cost of your premium.
- You can choose a longer waiting period such as 60 or 90 days before your benefit will start to be paid
- You can opt for a shorter benefit period (the length of time your claim will be paid out for)
- You can choose to be paid only up until age 60 instead of 65
- Take out a joint policy with your partner and receive a multi-policy discount
- Pre-pay your benefits up to 12 months to receive tax deduction for the current financial year, while receiving the benefit for the next financial year
- You can reduce the overall cost of Income Protection by combining it with other benefits such as TPD cover in a life insurance package
- Already got cover? It could be worth reviewing your current cover to see if there is a more suitable option available to you
When you take out a life insurance or income protection policy, you have the option to structure your premium repayments as either stepped or level.
- Stepped premiums - Stepped premiums will increase over time in line with your age. They are a more affordable option at the start of your policy but increase steadily overtime...particularly once you have reached 40 years of age.
- Level premiums - Level premiums will start out higher than stepped but will remain the same for the life of the policy. Generally level premiums will end up being more affordable in the long run.
|Increase over time (%)||27.78%||0%||10.53%|
*Figures above are a rough estimate for illustrative purposes and should not be used as an indicator for cover.
So what type of premium should I choose for my situation?
Stepped premiums can be a good option if you are looking for a cost-effective option in the early years of your policy if you are on a tighter budget for cover. It's also more suitable if you are likely to change your policy in the future.
Level premiums could be a better choice if you are confident that your financial situation won't see too much change in the years ahead and that you are likely to stay with the same policy.
The waiting period is the period between the time you make the claim and are unable to work and the time you receive your benefit payout.
You can usually choose a waiting period of 14, 30, 60, 90 days, 1 year or 2 years
The shorter waiting periods usually correlate to a higher premium, as you are asking the insurer to pay your benefits sooner, however, if you have savings which can help you make ends meet for a few weeks or months, or sick leave you can use, you may want to opt for a longer waiting period to make some savings each month. In other cases, your insurer may also include an accident benefit, where the waiting period is waived if you are unable to work due to an accident.
Typical payment waiting period payment cycle:
|Day 1||Claim lodged by policyholder following onset of disability and stops work.|
|Day 30||Waiting period stops.|
|Day 60||First benefit payment given to policyholder.|
When you apply for coverage you will also be able to choose how long you want to receive the benefit payout for. Often you can choose from a benefit period of one, two or five years for example, or you can choose to receive your benefit up to a certain age, such as 60 or 65 years old. Again, the benefit period you choose can affect the cost of your premiums, as the longer the benefit period, the higher the premium.
Renewal to Policy Anniversary Preceding Age
|To Age 60||60|
|To Age 65||65|
|To Age 70||65|
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