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As prices skyrocket, here’s how to get affordable income protection insurance

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Policies have offered excellent value for years, but the risk is catching up with insurers and prices are rising. Thankfully, there are ways to limit the damage.

If you have income protection insurance, don't be surprised if you find yourself facing a bigger premium when you get your next renewal letter.

A number of major life insurers have already confirmed that price rises are on the horizon for income protection. According to the Financial Review, BT Life Insurance is expected to raise prices by up to 60%.

Super funds are also jacking up prices. HostPlus, which covers the hospitality, sport and tourism sectors, has already increased the cost of some policies by more than 70%.

So why the sudden - and very sharp - increase?

Income protection has consistently offered good terms at low rates, but it seems the deal may actually have been too good to be true.

In late 2020, the Australian Prudential Regulation Authority (APRA) warned about "excessively generous features and terms" which were rendering the industry unsustainable. As a result, prices have to go up.

Keeping costs down

Despite rising prices, income protection insurance is still a valuable safety net. It typically pays 75% of your normal income, if you ever become too sick or injured to work.

Finder cost research shows that a healthy 35-year-old man earning the national average annual salary of around $86,000 can expect to pay about $40 to $45 per month.

While that price is about to go up for some, there are steps you can take to limit the damage.

1. Compare online

Prices vary between providers and different life insurance brands will be increasing costs by different amounts. Compare online and you could find a better deal.

2. Increase the waiting period

The waiting period is the length of time you have to wait from being off work to claiming a benefit. You can usually choose a waiting period as short as two weeks, or as long as three months. The longer the waiting period, the cheaper the policy.

3. Reduce the benefit amount

Typically, income protection covers 75% of your typical wage - but you can adjust it and set a lower percentage. If you could survive on less, consider reducing your benefit amount and enjoying cheaper premiums.

4. Reduce the benefit period

You can choose to set a benefit period of a few months, all the way up to a few decades. The shorter your benefit period, the cheaper your premiums will be.

5. Deduct it from your tax

The ATO has confirmed that any insurance which protects against loss of income is tax-deductible. Don't forget when it comes to tax time!

Compare income protection insurance brands in Australia

1 - 4 of 6
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.
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